NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 1: Basis of preparation of the interim financial statements

The condensed consolidated interim financial statements of Coro Energy plc (the "Group") for the six month period ended 30 June 2023 have been prepared in accordance with Accounting Standard IAS 34 Interim Financial Reporting.

The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2022, which was prepared under International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006, and any public announcements made by Coro Energy plc during the interim reporting period.

These condensed consolidated interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2022 prepared under IFRS have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) of the Companies Act 2006. These condensed consolidated interim financial statements have not been audited.

The condensed consolidated interim financial statements of the Group are presented in United States Dollars ("USD" or "$"), rounded to the nearest $1,000.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except as set out below.

Basis of preparation - going concern

The interim financial statements have been prepared under the going concern assumption, which presumes that the Group will be able to meet its obligations as they fall due for the foreseeable future.

The Group ended the period with cash of $0.65m. During the reporting period the Group increased its available cash resources through an advance of US $1.6m of the consideration for the sale of the Italian gas portfolio. Subsequent to the reporting date the Group announced the sale of its entire investment in ion Ventures Holdings Limited for a cash consideration of £1.25m, of which £1m was paid immediately, as well as receiving a further advance of €0.7m of the consideration for the sale of the Italian gas portfolio.

Management have prepared a consolidated cash flow forecast for the period to 30 September 2024 which shows that the Group has sufficient cash headroom to meet its obligations during this period. However, this conclusion is conditional on the Group successfully repaying or restructuring its Eurobond obligations. Currently, the bonds are scheduled to mature in April 2024 when principal of €22.5m ($24.5m) will become repayable in full along with accrued and not paid interest of €6.8m ($7.4m).

The directors have a reasonable expectation that repayment or a debt restructuring can be achieved prior to maturity. 

Negotiations with bondholders have not yet commenced, and the ability of the Company to successfully restructure the bonds is not guaranteed. However, based on the above, the Directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing the Group financial statements for the period ended 30 June 2023. Should the Group be unable to continue trading, adjustments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities which might arise and to classify fixed assets as current.

a)   New and amended standards adopted by the Group

New and amended standards which became applicable on 1 January 2023 do not have a material impact on the Group, and the Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards/amendments.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

a)   New accounting policies adopted by the Group

There were no new accounting policies adopted by the Group during the period, nor any amendments to existing accounting policies.

Note 2: Significant changes

There have been no significant changes affecting the financial position and performance of the Group during the six months to 30 June 2023. The results of the Group for the comparative period to 30 June 2022 have been restated to classify the results of the Italian gas portfolio as a discontinued operation. Refer to note 11.

For further discussion of the Group's performance and financial position refer to the Chairman and CEO's Statement.

The Group's results are not materially impacted by seasonality.

Note 3: Segment information

The Group's reportable segments as described below are based on the Group's geographic business units. This includes the Group's upstream gas operations in Italy, upstream gas operations and renewable energy operations in South East Asia, along with the corporate head office in the United Kingdom. This reflects the way information is presented to the Group's Chief Operating Decision Maker, which is the Executive Chair.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 4: Profit and loss information

a)   General and administrative expenses

General and administrative expenses in the income statement includes the following significant items of expenditure:

b)    Finance income / expense

Note 5: Loss per share

The calculation of basic loss per share from continuing operations was based on the loss attributable to shareholders of $2.5m (2022: $3.8m) and a weighted average number of ordinary shares outstanding during the half year of 2,348,242,699 (2022: 2,124,035,967).

Diluted loss per share from continuing operations for the current and comparative periods is equivalent to basic loss per share since the effect of all dilutive potential ordinary shares is anti-dilutive.

Basic profit per share from discontinued operations was based on the profit attributable to shareholders from discontinued operations of $0.2m (2022: $0.8m).

Diluted profit per share from discontinued operations for the current and comparative periods include the potential dilutive effect of all share options and warrants that were "in the money" as at the reporting date. The potential dilutive shares includes options issued to Directors and management.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 6: Property, plant and equipment

Reconciliation of the carrying amounts for each material class of intangible assets for the six months ended 30 June 2023 are set out below:

Solar assets comprise of the Group's 3-megawatt pilot rooftop solar project in Vietnam.

Note 7: Intangible assets

Reconciliation of the carrying amounts for each material class of intangible assets for the six months ended 30 June 2023 are set out below:

Exploration and evaluation assets relate to the Group's interest in the Duyung PSC. No indicators of impairment of these assets were noted.

Intangible development assets comprise expenditure directly attributable to the design and development of identifiable and unique renewables projects controlled by the Group in the Philippines. No indicators of impairment of these assets were noted.

Goodwill was initially recognised following the acquisition of the renewables projects in the Philippines. During the six months ended 30 June 2023, the Group acquired an additional entitlement to dividends from its partners in these projects for a consideration of $145k, which was paid by issuing new ordinary shares in the Company (note 9). The Group's dividend entitlement increased from 80% to 88%. No impairment of goodwill was noted following testing performed at 31 December 2022.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 8: Borrowings

Borrowings relates to €22.5m Eurobonds with attached warrants which were issued in 2019 to institutional investors. The bonds were issued in two equal tranches A and B, ranking pari passu, with Tranche A paying an annual 5% cash coupon and Tranche B accruing interest at 5% payable on redemption. The bonds were scheduled to mature on 12 April 2022 at 100% of par value plus any accrued and unpaid coupon. However, in April 2022 the Group completed a restructuring of the Eurobonds which extended the maturity date by two years to 12 April 2024, removed all cash interest payment obligations prior to the maturity date, and increased the coupon interest rate from 5% to 10%. In the event of a sale of the Group's interest in the Duyung PSC, the net cash proceeds of such disposal(s) will be utilised to first repay the capital and rolled up interest on the Eurobonds and thereafter to distribute 20% of remaining net proceed(s) to holders of the Eurobonds. The remaining net proceeds of any sales will be retained and/or distributed to shareholders by the Company.

The restructured bonds were initially recognised at fair value and subsequently are recorded at amortised cost, with an average effective interest rate of 12.10%. The contingent payment upon the sale of the Company's interest in the Duyung PSC has not been considered in the estimate of the effective interest rate as it meets the definition of a contingent liability.

Loan interest for quarters ended 12 October 2022, 12 January 2023 and 12 April 2023 were settled by newly issued ordinary shares of the Company (note 9).

Note 9: Share capital and share premium

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 10: Reserves

a)   Other reserves

Share based payments reserve

The Group issued 70,000,000 options as a standalone award during the period to directors and management. The options vest on the third anniversary of the grant date and are subject to the achievement of certain performance criteria, being a final investment decision being taken by the partners to the Duyung PSC or the successful sale of the Company's interest in the Duyung PSC. Should the performance criteria not be met as it is no longer relevant, the Remuneration Committee may permit the options to vest it is deemed appropriate to do so. Vested options will be exercisable at 0.255 British pence per ordinary share.

The options have been valued on the grant date using a Black Scholes model, resulting in a valuation of £0.0013 per award. The total value of the awards will be expensed over the vesting period in line with the requirements of IFRS 2.

Functional currency translation reserve

The translation reserve comprises all foreign currency differences arising from translation of the financial position and performance of the parent company and certain subsidiaries which have a functional currency different to the Group's presentation currency of USD. The total loss on foreign exchange recorded in other reserves for the period was $1.5m (2022: $2.1m gain).

Note 11: Restatement of comparative period in relation to Italy

On 7 March 2022 the Group announced that having completed a full review of the Italian assets it was decided that, despite the Group remaining focused on South East Asia, to maximise shareholder value, the Italian assets would no longer be marketed for sale and would instead be managed for value and cash flow. As such the Italian business temporarily did not qualify as a disposal group or discontinued operation under IFRS 5 from this date and at 30 June 2022 and for the six months then ended.

The Group, in common with other European gas producers, experienced a significant increase in wholesale gas prices since March 2022, which resulted in a materially positive impact on the value of the Italian operations. In August 2022, following unsolicited approaches, the Group entered into an option agreement with Zodiac Energy plc ("Zodiac") whereby Zodiac acquired the right to acquire 100% of the issued share capital of Coro Energy Europe Ltd, the wholly owned subsidiary holding the Groups Italian gas portfolio, for a total consideration of up to €7.5m (the "Option Agreement"). As announced by the Company on 24 August 2022, Zodiac paid a non-refundable deposit of €0.3m with a further €5.7m to be paid in cash on completion and further contingent payments up to an aggregate of €1.5m through a net profit interest. A definitive Sale and Purchase Agreement ("SPA") was executed on 27 March 2023 and an initial cash payment of €1.5m was received on 4 April 2023. The shareholders of the Company approved the disposal on 25 April 2023 and the disposal remains dependent only on customary regulatory consents. The Group expects the disposal to complete during Q4, 2023.

The Board of Directors are committed to the disposal of the Italian operation under the terms of the SPA, and resultantly the Group classified the assets and liabilities of its Italian business as a disposal group held for sale, as well as a discontinued operation, as at 31 December 2022 and as at 20 June 2023.

The comparative figures in these condensed consolidated financial statements have been restated to show the Italian business as discontinued operations. The table below set out the impact of this restatement on the comparative figures.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 11: Restatement of comparative period in relation to Italy (continued)

Effect on the condensed consolidated statement of comprehensive income for the six months ended 30 June 2022:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 12: Interests in other entities

Asia

The Group's wholly owned subsidiary, Coro Energy Duyung (Singapore) Pte Ltd, is the owner of a 15% interest in the Duyung Production Sharing Contract ("PSC").

The Duyung PSC partners have entered into a Joint Operating Agreement ("JOA"), which governs the arrangement. Through the JOA, the Group has a direct right to the assets of the venture, and direct obligation for its liabilities. Accordingly, Coro accounts for its share of assets, liabilities and expenses of the venture in accordance with the IFRSs applicable to the particular assets, liabilities and expenses.

The operator of the venture is West Natuna Exploration Ltd ("WNEL"). WNEL is a company incorporated in the British Virgin Islands and its principal place of business is Indonesia.

The Group's wholly owned subsidiary Coro Asia Renewables Ltd, has a 88% economic interest in the Philippines company, Coro Clean Energy Vietnam Inc, which owns 100% of three Philippines incorporated subsidiaries that hold the Group's intangible development assets in this country.

The Group's wholly owned subsidiary Coro Clean Energy Vietnam Ltd, is the owner of a 85% interest in the Vietnamese company, Coro Renewables VN1 Joint Stock Company, which owns 100% of Coro Renewables VN2 Company Limited, which in tun owns 100% of Coro Renewables Vietnam Company Limited ("CRVCL"). CRVCL is the operator of a 3-megawatt pilot rooftop solar development in Vietnam.

Italy

The Group's Italian subsidiary, Apennine Energy SpA, is the owner of the Group's Italian gas portfolio which is in the process of being sold (note 11).

ion Ventures

In 2020, the Company acquired a 20.3% interest in ion Ventures Holdings Limited which is treated as an associate and accounted for under the equity method. The Group disposed of its entire shareholding in August 2023 (note 14).

The Group's share of loss of associates for the 6 months ended 30 June 2023 was $48k (2022: loss $47k). There were no dividends declared or paid by associates during the period.

Note 13: Contingencies and commitments

Commitments

Coro's share of the 2023 Duyung Work Programme and Budget is estimated at $1.2m, which will be allocated between items of capital expenditure and joint venture G&A. The Group had no capital committed work programmes in its Philippine or Vietnam operations.

Contingencies

The Company undertook to the Noteholders that in the event of a sale of the Company's interest in the Duyung PSC to utilise the net cash proceeds of such disposal(s) to first repay the capital and rolled up interest on the Notes and thereafter to distribute 20% of remaining net proceed(s) to Noteholders. The remaining net proceeds of any sales would be retained and/or distributed to shareholders by the Company. Due to its nature, it is not possible to quantify the financial impact of this contingent liability.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 June 2023

Note 14: Subsequent events

On 3 August 2023, the Company received an indicative funding proposal from and is in advanced talks with Capton Energy regarding possible co-investment solutions for the Company's Vietnamese rooftop solar projects. Capton Energy, based in Dubai, is a joint venture between Siemens Financial Services and Desert Technologies. The funding proposal received is for Capton to buy into the Company's current Vietnamese solar projects and provide investment in the project pipeline of up to 50 megawatts. The Company has committed to a four-month period of exclusivity for the parties to conclude the transaction.

On 10 August 2023 the Company announced that it had signed an Addendum to the Sale and Purchase Agreement ("SPA") in relation to the Group's Italian gas portfolio, as previously announced on 27 March 2023. The buyer, Zodiac Energy plc ("Zodiac") has made a further cash advance of €0.7m (the "Additional Advance") which will bring the total advanced to Coro to date to €2.5m. The Company has agreed to reduce the sum due at completion by the Additional Advance and an additional €0.14m. Furthermore the longstop date under the SPA has been extended to the 31 December 2023, and the requirement for the Company to settle the €1.86m intercompany loan from Apennine Energy SpA has been replaced with an assignment of the loan directly to Zodiac. Consequently the residual amount expected to be received on completion is now €1.36m with a further €0.14m to be received as soon as practicable after completion.

On 24 August 2023 the Company announced that it has agreed to sell its entire shareholding in ion Ventures Holdings Ltd ("ion") to SLT1 LLC, a privately owned entity based in the USA, for a cash consideration of £1.25m ($1.59m), of which £1m will be paid immediately, and the remaining £250k will be paid by 31 March 2024. The shareholding was acquired by Coro for £500k ($662k) in 2020.

On 12 September 2023 the Company announced that the operator of the Duyung PSC had signed a non-binding Term Sheet with Sembcorp Gas Pte. Ltd. for a long-term gas sales agreement for the Mako gas field. The Term Sheet has been endorsed by the Indonesian petroleum upstream regulator (SKK Migas). The Operator has indicated finalisation of a GSA and FID before the end of Q4 2023.