Notes to the Company Accounts

For the year ended 31 December 2010

29 Company accounting policies

Accounting convention

These financial statements have been prepared on the going concern basis, under the historical cost convention, as modified by the revaluation of certain financial instruments in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. A summary of the more important Company accounting policies is set out below.

Tangible fixed assets

Tangible fixed assets are carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the assets into the location and condition where it is capable for use. Borrowings costs are not capitalised.

Fixed assets 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. The principal period of depreciation used is as follows:

Vehicles, plant and equipment

4 to 15 years.

Impairment of tangible fixed assets

Tangible fixed assets are 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 (income-generating units).

Foreign currencies

At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. At the year end, monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange 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 Company enters into forward foreign exchange contracts. The Company's financial statements are presented in Sterling, which is the Company's presentational currency.

Derivative financial instruments

The accounting policy is identical to that applied by the consolidated Group as set out in the Notes to the Group Accounts, however the UK GAAP standards are applied, specifically FRS 26 'Financial instruments: Measurement' and FRS 29 'Financial instruments: Disclosure'.

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.

Cash flow statement and related party disclosures

The Company is included in the Group Accounts of Aggreko plc, which are publicly available. Consequently, the Company is not required to produce a cash flow statement. The Company is also exempt under the terms of Financial Reporting Standard 8 'Related Party Disclosures' from disclosing related party transactions with entities that are part of the Group.

Taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

A net deferred tax asset is recognised as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of underlying timing differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on an undiscounted basis.

Pensions

The Company operates both a defined benefit pension scheme and a defined contribution pension scheme. The accounting policy is identical to that applied by the consolidated Group as set out in the Notes to the Group Accounts section.

Investments

Investments in subsidiary undertakings are stated in the balance sheet of the Company at cost, or nominal value of the shares issued as consideration where applicable, less provision for any impairment in value. Share-based payments recharged to subsidiary undertakings are treated as capital contributions and are added to investments.

Leases

Leases where substantially all of the risks and rewards of ownership are not transferred to the Company 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.

Grants

Capital grants in respect of additions to fixed assets are treated as deferred income and released to the income statement over the estimated operational lives of the related assets.

Share-based payments

The accounting policy is identical to that applied by the consolidated Group as set out in the Notes to the Group Accounts section with the exception that shares issued by the Company to employees of its subsidiaries for which no consideration is received are treated as an increase in the Company's investment in those subsidiaries.

Dividend distribution

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

30 Dividends

Refer to Note 10 of the Group Accounts.

31 Auditors' remuneration

	2010 £000	2009 £000
Fees payable to the Company's auditor for the audit of the Company's annual accounts	130	124
Fees payable to the Company's auditor and its associates for other services:
– Other services pursuant to legislation	28	27
– All other services	122	35

32 Tangible fixed assets

	Total £ million
Cost
At 1 January 2010	18.9
Additions	1.4
Disposals	(0.2)
At 31 December 2010	20.1
Accumulated depreciation
At 1 January 2010	12.6
Charge for the year	2.3
Disposals	(0.2)
At 31 December 2010	14.7
Net book values:
At 31 December 2010	5.4
At 31 December 2009	6.3

The tangible fixed assets of the Company comprise vehicles, plant and equipment.

33 Investments

	£ million
Cost of investments in subsidiary undertakings:
At 1 January 2010	108.7
Additions	5.1
Net impact of share-based payments	1.7
Exchange	2.2
At 31 December 2010	117.7

Details of the Company's principal subsidiary undertakings are set out in Note 26 to the Group Accounts.

34 Debtors

	2010 £ million	2009 £ million
Prepayments and accrued income	0.2	0.6
Other receivables	0.6	0.4
Amounts due from subsidiary undertakings	552.3	542.5
	553.1	543.5

35 Borrowings

	2010 £ million	2009 £ million
Non-current
Bank borrowings	101.2	180.0
Current
Bank overdrafts	3.7	–
Bank borrowings	23.2	–
	26.9	–
Total borrowings	128.1	180.0

The bank overdrafts and borrowings are all unsecured.

(i) Maturity of financial liabilities

The maturity profile of the borrowings was as follows:

	2010 £ million	2009 £ million
Within 1 year, or on demand	26.9	–
Between 1 and 2 years	–	151.1
Between 2 and 3 years	81.8	–
Between 3 and 4 years	–	28.9
Between 4 and 5 years	19.4	–
	128.1	180.0

(ii) Borrowing facilities

The Company has the following undrawn committed floating rate borrowing facilities available at 31 December 2010 in respect of which all conditions precedent had been met at that date:

	2010 £ million	2009 £ million
Expiring within 1 year	68.0	–
Expiring between 1 and 2 years	30.0	215.9
Expiring between 2 and 3 years	166.6	97.1
Expiring between 3 and 4 years	–	31.1
Expiring between 4 and 5 years	205.5	–
Expiring after 5 years	–	–
	470.1	344.1

Towards the end of 2010, we refinanced £459 million of bank facilities, putting in place new facilities with maturities of 3 and 5 years. In addition, since the year end, we have for the first time raised funding in the US private placement market, securing US$275 million (£177 million), with maturities ranging between 7 and 10 years and with the same financial covenants as our banking facilities. Drawdown of these funds will take place in mid March 2011. A further £9.6 million of bank facilities, arranged prior to the year end, became available for drawdown on 3 February 2011.

(iii) Interest rate risk profile of financial liabilities

The interest rate profile of the Company's financial liabilities at 31 December 2010, 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:
Sterling	1.9	–	1.9	–	–
US Dollar	15.3	93.6	108.9	4.6	5.8
Euro	–	17.3	17.3	5.0	2.6
At 31 December 2010	17.2	110.9	128.1
Sterling	39.0	–	39.0	–	–
US Dollar	18.6	89.5	108.1	4.6	6.8
Euro	15.1	17.8	32.9	5.0	3.6
At 31 December 2009	72.7	107.3	180.0

The floating rate financial liabilities principally comprise debt which carries interest based on different benchmark rates depending on the currency of the balance. The principal benchmark rates for floating rate financial liabilities are the relevant LIBOR (London Interbank Offered Rate) rates for Sterling, Dollars and Euros and liabilities are normally fixed in advance for periods between one and three months.

The effect of the Company's interest rate swaps is to classify £110.9 million (2009: £107.3 million) of borrowings in the above table as fixed rate.

The notional principal amount of the outstanding interest rate swap contracts at 31 December 2010 was £110.9 million (2009: £107.3 million).

(iv) Preference share capital

	2010 Number	2010 £000	2009 Number	2009 £000
Authorised:
preference shares of 25 pence each	199,998	50	199,998	50

No redeemable preference shares were allotted as at 31 December 2010 and 31 December 2009. The Board is authorised to determine the terms, conditions and manner of redemption of redeemable shares.

36 Financial instruments

(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 Company's financial assets and financial liabilities at 31 December 2010. 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. Where available, market values have been used to determine fair values.

	2010		2009
	Book value £ million	Fair value £ million	Book value £ million	Fair value £ million
Primary financial instruments held or issued to finance the Company's operations:
Current bank borrowings and overdrafts	(26.9)	(26.9)	–	–
Amounts due to subsidiary undertakings	(205.3)	(205.3)	(158.4)	(158.4)
Non-current bank borrowings	(101.2)	(101.2)	(180.0)	(180.0)
Derivative financial instruments held:
Interest rate swaps	(9.5)	(9.5)	(6.7)	(6.7)

(ii) Summary of methods and assumptions

Interest rate swaps and forward foreign currency contracts
Fair value is based on market price of these instruments at the balance sheet date.

Current borrowings and overdrafts/liquid resources
The fair value of liquid resources 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 bank loans and other loans, the fair value approximates to the carrying value reported in the balance sheet as the majority are floating rate where payments are reset to market rates at intervals of less than one year.

(iii) 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.

	2010		2009
	Assets £ million	Liabilities £ million	Assets £ million	Liabilities £ million
Less than one year:
Interest rate swaps – cash flow hedge	–	(1.1)	–	–
Forward foreign currency contracts – cash flow hedge	–	–	–	–
More than one year:
Interest rate swaps – cash flow hedge	–	(8.4)	–	(6.7)
	–	(9.5)	–	(6.7)

Net fair values of derivative financial instruments

The net fair value of derivative financial instruments and designated for cash flow hedges at the balance sheet date were:

	2010 £ million	2009 £ million
Contracts with positive fair values:
Forward foreign currency contracts	–	–
Contracts with negative fair values:
Interest rate swaps	(9.5)	(6.7)
Forward foreign currency contracts	–	–
	(9.5)	(6.7)

The net fair value losses at 31 December 2010 on open interest rate swaps that hedge interest risk are £9.5 million (2009: losses of £6.7 million). These will be debited to the income statement interest charge over the remaining life of each interest rate swap.

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

As at 31 December 2010
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	26.9	81.8	19.4	128.1
Effect of interest rate swaps	(29.0)	(17.3)	(64.6)	(110.9)
	(2.1)	64.5	(45.2)	17.2
As at 31 December 2009
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	–	180.0	–	180.0
Effect of interest rate swaps	–	(45.6)	(61.7)	(107.3)
	–	134.4	(61.7)	72.7

As at 31 December 2010 and 31 December 2009 all of the Company's debt was exposed to repricing within 3 months of the balance sheet date.

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

	2010	2009
Bank overdraft	1.9%	–%
Bank borrowings	0.9%	0.8%

37 Other creditors: amounts falling due within one year

	2010 £ million	2009 £ million
Accruals and deferred income	17.5	15.3
Amounts owed to subsidiary undertakings	205.3	158.4
	222.8	173.7

38 Deferred tax

	2010 £ million	2009 £ million
At 1 January	3.4	5.8
Credit to the income statement	2.6	1.4
Credit/(charge) to equity	0.7	(3.8)
At 31 December	6.7	3.4
Deferred tax provided in the Accounts is as follows:
Accelerated capital allowances	(0.2)	(0.5)
Other timing differences	6.9	3.9
	6.7	3.4
Deferred tax asset relating to pension deficit:
At 1 January	1.6	2.2
Deferred tax charge to income statement	(0.9)	(1.2)
Deferred tax credited to Statement of Total Recognised Gains and Losses	0.2	0.6
	0.9	1.6

39 Pension commitments

	2010 £ million	2009 £ million
FRS 17 Deficit in the scheme (Refer to Note 25 of the Group Accounts)	(3.2)	(5.8)
Related deferred tax asset	0.9	1.6
	(2.3)	(4.2)

40 Share capital

	2010 Number	2010 £000	2009 Number	2009 £000
Allotted, called up and fully paid:
Ordinary shares of 20p each	274,318,271	54,864	273,473,338	54,695

During the year 631,527 Ordinary shares of 20 pence each have been issued at prices ranging from £1.17 to £7.11 (US$10.64) to satisfy the exercise of options under the Savings-Related Share Option Schemes ('Sharesave') and Executive Share Option Schemes by eligible employees. In addition 213,406 shares were allotted to US participants in the Long-term Incentive Plan by the allotment of new shares at 20 pence per share. Net proceeds from the issue of Ordinary shares were £1.7 million (2009: £3.4 million).

41 Reconciliation of movements in shareholders' funds

	Called up share capital £ million	Share premium account £ million	Treasury shares £ million	Capital redemption reserve £ million	Hedging reserve £ million	Profit and loss account £ million	Capital and reserves £ million
1 January 2010	54.7	13.3	(25.8)	0.1	(4.4)	260.7	298.6
Profit for the financial year	–	–	–	–	–	77.6	77.6
Dividends	–	–	–	–	–	(39.7)	(39.7)
Fair value losses on interest rate swaps	–	–	–	–	(2.8)	–	(2.8)
Credit in respect of employee share awards	–	–	–	–	–	18.7	18.7
Issue of ordinary shares to employees under share option schemes	–	–	3.4	–	–	(3.4)	–
Actuarial losses on retirement benefits	–	–	–	–	–	(0.6)	(0.6)
Deferred tax on items taken to equity	–	–	–	–	0.7	0.2	0.9
New share capital subscribed	0.2	1.5	–	–	–	–	1.7
Purchase of treasury shares	–	–	(27.2)	–	–	–	(27.2)
31 December 2010	54.9	14.8	(49.6)	0.1	(6.5)	313.5	327.2

	Called up share capital £ million	Share premium account £ million	Treasury shares £ million	Capital redemption reserve £ million	Hedging reserve £ million	Profit and loss account £ million	Capital and reserves £ million
1 January 2009	54.4	10.2	(20.5)	0.1	(14.4)	91.3	121.1
Profit for the financial year	–	–	–	–	–	193.5	193.5
Dividends	–	–	–	–	–	(28.6)	(28.6)
Fair value gains on interest rate swaps	–	–	–	–	10.6	–	10.6
Transfer from hedging reserve to net finance charge on early termination of interest rate swaps	–	–	–	–	3.1	–	3.1
Transfer from hedging reserve to net finance charge	–	–	–	–	0.1	–	0.1
Credit in respect of employee share awards	–	–	–	–	–	9.2	9.2
Issue of ordinary shares to employees under share option schemes	–	–	3.1	–	–	(3.1)	–
Actuarial losses on retirement benefits	–	–	–	–	–	(2.1)	(2.1)
Deferred tax on items taken to equity	–	–	–	–	(3.8)	0.5	(3.3)
New share capital subscribed	0.3	3.1	–	–	–	–	3.4
Purchase of treasury shares	–	–	(8.4)	–	–	–	(8.4)
31 December 2009	54.7	13.3	(25.8)	0.1	(4.4)	260.7	298.6

42 Operating lease commitments – minimum lease payments

	2010 Land and buildings £ million	2009 Land and buildings £ million
Commitments under operating leases expiring:
Within 1 year	–	–
Later than 1 year and less than 5 years	0.2	0.2
After 5 years	0.2	0.2
Total	0.4	0.4

43 Profit and loss account

As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account and related notes. The profit for the financial year of the Company was £77.6 million (2009: £193.5 million).