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Notes to the Group Accounts

For the year ended 31 December 2010

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.

For practical reasons, the Group prepares its financial statements on a 52 or 53 week period. The financial statements for the 2010 financial year reflect the 52 week period ended 1 January 2011. The financial statements for the 2009 financial year reflect the 53 week period ended 2 January 2010.

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

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010.

IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates', and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs are expensed.

(b) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2010 but not currently relevant to the Group (although they may affect the accounting for future transactions and events)

IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. IAS 27 (revised) has had no impact on the current period.
IAS 38 (amendment), 'Intangible assets', effective 1 January 2010. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives.
IFRIC 12, 'Service concession arrangements' (effective 30 March 2009). This interpretation applies to contractual arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services for example, under private finance initiative contracts (PFI) contracts. Under these arrangements, assets are assessed as either intangible assets or finance receivables.
IFRIC 15, 'Agreements for construction of real estates' (effective 1 January 2009; EU-endorsed for use 1 January 2010). This interpretation clarifies which standard (IAS 18, 'Revenue', or IAS 11, 'Construction contracts') should be applied to particular transactions.
IFRIC 16, 'Hedges of a net investment in a foreign operation' effective 1 July 2009. This amendment states that, in a hedge of a net investment in a foreign operation, qualifying hedging instruments may be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements of IAS 39 that relate to a net investment hedge are satisfied. In particular, the group should clearly document its hedging strategy because of the possibility of different designations at different levels of the group.
IFRIC 17, 'Distribution of non-cash assets to owners' (effective on or after 1 July 2009). The interpretation was published in November 2008. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable.
IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 1 July 2009 however the interpretation was only EU-endorsed for use in periods beginning on or after 31 October 2009. This interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water). In some cases, the entity receives cash from a customer that must be used only to acquire or construct the item of property, plant, and equipment in order to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services (or to do both).
IFRS 2 (amendments), 'Group cash-settled share-based payment transactions', effective from 1 January 2010. In addition to incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 – Group and treasury share transactions', the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by that interpretation.
Improvements to International Financial Reporting Standards 2009 were issued in April 2009. This is a collection of amendments to 12 standards. The effective dates vary standard by standard but most are effective 1 January 2010.

(c) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2010 and not early adopted

The Group's assessment of the impact of these new standards and interpretations is set out below.

Amendments to IFRS 7 'Financial instruments: Disclosures on derecognition'. These amendments are part the IASBs comprehensive review of off balance sheet activities. The amendments will promote transparency in the reporting of transfer transactions and improve users' understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position, particularly those involving securitisation of financial asset. The amendments are effective for annual periods beginning 1 January 2011.
IFRS 9, 'Financial instruments', issued in November 2009. This standard is the first step in the process to replace IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. However, the standard has not yet been endorsed by the EU.
Amendments to IAS 12 ' Income taxes'. Currently IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. Hence this amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. The amendments are effective for annual periods beginning 1 January 2012.
Amendments to IAS 24 (revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or in part, is permitted. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities.
'Classification of rights issues' (amendment to IAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 'Accounting policies, changes in accounting estimates and errors'.
'Prepayments of a minimum funding requirement' (amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, 'IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction'. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct this. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented.
IFRIC 19, 'Extinguishing financial liabilities with equity instruments', effective 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished.
Improvements to International Financial Reporting Standards 2010 were issued in May 2010. This is a collection of amendments to 6 standards and 1 IFRIC. The effective dates vary standard by standard but most are effective 1 January 2011.

The Directors do not anticipate that the adoption of any of the other above standards or interpretations will have a material impact on the Group's financial statements in the period of initial application.

Basis of consolidation

The Group financial statements consolidate the financial statements of Aggreko plc and all its subsidiaries for the year ended 31 December 2010. 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 values 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 Europe, Middle East & South East Europe, North America and International Local (together the Group's Local business) and International Power Projects (IPP). IPP is managed as a single business, with the deployment of assets varying from year to year depending on the location of projects.

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.

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. 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

Capital grants

Capital grants in respect of additions to property, plant and equipment are netted against the cost of the related asset and this cost is depreciated in accordance with the policy above.

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 in 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.

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 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 finance costs 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 finance costs 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 finance costs 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 finance costs in the income statement.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

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 other income in 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 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 may be impaired. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables account.

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 after 7 November 2002 in accordance with the transitional provisions of the standard. 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 for employee sharesave options and using the Monte Carlo option-pricing model for Executive share options.

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 of cash and cash equivalents used in the cashflow statement is cash in hand and deposits with a maturity of three months or less and includes bank overdrafts.

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 £801.7 million, or around 93%, 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 which we depreciate over 10 years. The annual fleet depreciation charge of £146.8 million (2009: £138.1 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 2010 was £2.8 million (2009: £2.7 million). Included in this charge was £2.7 million related to the amortisation of intangible assets arising from business combinations (2009: £2.5 million).

Goodwill of £60.4 million (2009: £51.3 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.

Pensions

Pension arrangements vary for our employees and schemes reflect best practice and regulation in each country. The Group operates a defined benefit scheme for UK employees, which was closed to new employees joining the Group after 1 April 2002; most of the other schemes in operation around the world are varieties of defined contribution schemes.

Under IAS 19: 'Employee Benefits' Aggreko has recognised a pre-tax pension deficit of £3.2 million at 31 December 2010 (2009: £5.8 million) which is determined using actuarial assumptions. The decrease in the pension deficit is a result of the additional contributions made by the Company during the year over and above the cost of accrual of benefits. The Company paid £3.5 million in January 2010 in line with the Recovery Plan agreed for the Scheme following the actuarial valuation at 31 December 2008. In addition higher-than-expected returns were achieved on Scheme assets over the year. The additional contributions and investment returns have been offset by lower net interest rates used to value the liabilities.

The main assumptions used in IAS 19 valuation for the previous two years are shown in Note 25 of the Accounts. The sensitivities regarding the assumptions are contained within the Detailed Financial Review section.

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 into which the Group enters 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 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 and guarantees. As a result of the rigorous approach to risk management, the Group has historically had a low level of bad debt. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables account. At 31 December 2010 the provision for impairment of trade receivables in the balance sheet was £33.4 million (2009: £26.2 million).

Taxation

Aggreko's tax charge of 30.0% is based on the profit for the year and tax rates in force at the balance sheet date. In addition to corporation tax, Aggreko is subject to indirect taxes such as sales and employment taxes across 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. Further detail, including a detailed tax reconciliation, is shown at Note 9 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 Group's objective with respect to managing capital is to maintain a balance sheet structure that safeguards the Group's financial position through economic cycles and one that is efficient in terms of providing long term returns to shareholders. If appropriate the Group can choose to adjust its capital structure by varying the amount of dividends paid to shareholders, by returning of capital to shareholders, by issuing new shares or by adjusting the level of capital expenditure. Gearing at 31 December 2010 decreased to 16% from 29% at 31 December 2009. Total capital is equity as shown in the Group balance sheet.

The Group maintains sufficient facilities to meet its normal funding requirements over the medium-term. At 31 December 2010 these facilities are primarily in the form of committed bank facilities totalling £604.1 million, arranged on a bilateral basis with a number of international banks. 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. The Group does not consider that these financial covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 17 in the Annual Report and Accounts.

Net debt amounted to £132.2 million at 31 December 2010 and at that date undrawn committed facilities were £470.1 million.

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.

Interest rate risk

The Group's policy is to minimise 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 2010, £110.9 million of the net debt of £132.2 million was at fixed rates of interest resulting in a fixed to floating rate net debt ratio of 84:16 (2009: 61:39)¹. 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 £0.5 million (2009: £0.7 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 into Sterling of its net investments in overseas subsidiaries. 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, Euro and Sterling.

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 positive impact of currency, largely due to the movement in the US Dollar and the Australian Dollar, increased our revenues by £23.4 million (2009: £145.9 million) and trading profit by £6.5 million (2009: £35.9 million) for the year ended 31 December 2010. 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 £9.1 million (2009: £7.2 million) in trading profit² in terms of translation. For every 5 cents movement in the Euro to GBP exchange rate there is an approximate impact of £0.5 million (2009: £0.3 million) in trading profit in terms of translation. Currency translation also gave rise to a £39.1 million increase in reserves as a result of year on year movements in the exchange rates (2009: decrease of £30.9 million). For every 5 cents movement in the US Dollar and Euro, there is an approximate impact in equity of £3.3 million and £0.6 million respectively (2009: £3.4 million and £1.5 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 IPP 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 and bank guarantees. 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 The increase in this ratio is driven by a decrease in Group net debt rather than an increase in the absolute value of fixed rate debt.
2 Trading profit represents operating profit before gain on sale of property, plant and equipment.

2 Cashflow from operating activities

	2010 £ million	2009 £ million
Profit for the year	213.1	168.4
Adjustments for:
Tax	91.3	75.6
Depreciation	158.3	148.2
Amortisation of intangibles	2.8	2.7
Finance income	(0.5)	(0.4)
Finance cost	10.6	18.5
Profit on sale of PPE (see below)	(2.7)	(9.6)
Share based payments	18.7	9.2
Changes in working capital (excluding the effects of exchange differences on consolidation):
(Increase)/decrease in inventories	(27.7)	7.5
(Increase)/decrease in trade and other receivables	(73.5)	35.2
Increase/(decrease) in trade and other payables	77.5	(24.5)
Cash generated from operations	467.9	430.8

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

	2010 £ million	2009 £ million
Net book amount	5.1	5.8
Profit on sale of PPE	2.7	9.6
Proceeds from sale of PPE	7.8	15.4

3 Cash and cash equivalents

	2010 £ million	2009 £ million
Cash at bank and in hand	20.0	21.7
Short-term bank deposits	6.4	0.5
	26.4	22.2

The effective interest rate on short-term bank deposits was 0.2% (2009: 2.6%); 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:

	2010 £ million	2009 £ million
Cash and cash equivalents	26.4	22.2
Bank overdrafts (Note 17)	(16.2)	(8.7)
	10.2	13.5

4 Segmental reporting
(a) Revenue by segment

	Total revenue		Inter-segment revenue		External revenue
	2010 £ million	2009 £ million	2010 £ million	2009 £ million	2010 £ million	2009 £ million
Middle East & South East Europe	97.6	90.8	–	0.1	97.6	90.7
Europe	164.3	158.9	0.1	–	164.2	158.9
North America	246.8	197.7	0.9	0.1	245.9	197.6
International Local	188.8	97.0	1.1	0.2	187.7	96.8
Local business	697.5	544.4	2.1	0.4	695.4	544.0
International Power Projects	536.0	481.0	1.5	1.1	534.5	479.9
Eliminations	(3.6)	(1.5)	(3.6)	(1.5)	–	–
Group	1,229.9	1,023.9	–	–	1,229.9	1,023.9

Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third-parties.

(b) Profit by segment

	Trading profit pre intangible asset amortisation		Amortisation of intangible assets arising from business combinations		Trading profit
	2010 £ million	2009 £ million	2010 £ million	2009 £ million	2010 £ million	2009 £ million
Middle East & South East Europe	23.1	22.5	(0.1)	(0.1)	23.0	22.4
Europe	18.7	13.0	(0.1)	(0.1)	18.6	12.9
North America	46.8	35.7	(1.7)	(1.6)	45.1	34.1
International Local	55.9	24.1	(0.7)	(0.6)	55.2	23.5
Local business	144.5	95.3	(2.6)	(2.4)	141.9	92.9
International Power Projects	170.0	159.7	(0.1)	(0.1)	169.9	159.6
Group	314.5	255.0	(2.7)	(2.5)	311.8	252.5

	Gain/(loss) on sale of PPE		Operating profit
	2010 £ million	2009 £ million	2010 £ million	2009 £ million
Middle East & South East Europe	0.1	(0.1)	23.1	22.3
Europe	1.4	7.0	20.0	19.9
North America	2.3	2.7	47.4	36.8
International Local	0.2	0.1	55.4	23.6
Local business	4.0	9.7	145.9	102.6
International Power Projects	(1.3)	(0.1)	168.6	159.5
Group	2.7	9.6	314.5	262.1
Finance costs – net			(10.1)	(18.1)
Profit before taxation			304.4	244.0
Taxation			(91.3)	(75.6)
Profit for the year			213.1	168.4

(c) Depreciation and amortisation by segment

	2010 £ million	2009 £ million
Middle East & South East Europe	18.5	16.3
Europe	20.7	24.9
North America	28.2	28.4
International Local	20.3	16.1
Local business	87.7	85.7
International Power Projects	73.4	65.2
Group	161.1	150.9

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

	2010 £ million	2009 £ million
Middle East & South East Europe	26.3	11.9
Europe	27.0	7.9
North America	54.1	24.4
International Local	23.8	21.0
Local business	131.2	65.2
International Power Projects	146.3	99.2
Group	277.5	164.4

Capital expenditure comprises additions of property, plant and equipment (PPE) of £268.8 million (2009: £160.9 million), acquisitions of PPE of £5.6 million (2009: £1.4 million), and acquisitions of other intangible assets of £3.1 million (2009: £2.1 million).

(e) Assets/(liabilities) by segment

	Assets		Liabilities
	2010 £ million	2009 £ million	2010 £ million	2009 £ million
Middle East & South East Europe	121.7	106.1	(13.2)	(9.5)
Europe	162.6	148.1	(39.8)	(33.8)
North America	273.8	222.2	(43.2)	(27.0)
International Local	174.9	114.1	(30.1)	(19.9)
Local business	733.0	590.5	(126.3)	(90.2)
International Power Projects	656.8	521.1	(197.7)	(137.6)
	1,389.8	1,111.6	(324.0)	(227.8)
Tax and finance payable	14.7	10.5	(110.1)	(89.7)
Derivative financial instruments	0.1	–	(10.5)	(6.7)
Borrowings	–	–	(142.4)	(189.0)
Retirement benefit obligation	–	–	(3.2)	(5.8)
Total assets/(liabilities) per balance sheet	1,404.6	1,122.1	(590.2)	(519.0)

(f) Average number of employees by segment

	2010 Number	2009 Number
Middle East & South East Europe	300	270
Europe	799	808
North America	810	850
International Local	492	439
Local business	2,401	2,367
International Power Projects	1,313	1,253
Group	3,714	3,620

(g) Reconciliation of net operating assets to net assets

	2010 £ million	2009 £ million
Net operating assets	1,065.8	883.8
Retirement benefit obligation	(3.2)	(5.8)
Net tax and finance payable	(95.4)	(79.2)
	967.2	798.8
Borrowings and derivative financial instruments	(152.8)	(195.7)
Net assets	814.4	603.1

5 Profit before taxation

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

	2010 £ million	2009 £ million
Staff costs (Note 7)	238.7	201.2
Cost of inventories recognised as an expense (included in cost of sales)	68.7	58.1
Depreciation of property, plant and equipment	158.3	148.2
Amortisation of intangibles (included in administrative expenses)	2.8	2.7
Gain on disposal of property, plant and equipment	(2.7)	(9.6)
Trade receivables impairment	9.5	7.5
Other operating lease rentals payable
– Plant and equipment	14.5	12.7
– Property	11.3	9.8

6 Auditors' remuneration

	2010 £000	2009 £000
Audit services
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:
– The audit of the Company's subsidiaries, pursuant to legislation	419	439
– Other services pursuant to legislation	28	27
– Tax services	180	92
– All other services	156	89

7 Employees and Directors

Staff costs for the Group during the year:

	2010 £ million	2009 £ million
Wages and salaries	194.3	170.7
Social security costs	18.4	14.9
Share-based payments	18.7	9.2
Pension costs – defined contribution plans	5.1	4.9
Pension costs – defined benefit plans (Note 25)	2.2	1.5
	238.7	201.2

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

The key management comprise Executive and Non-executive Directors.

	2010 £ million	2009 £ million
Salaries and short-term benefits	4.1	3.2
Post-employment benefits	0.2	0.3
Share-based payments	4.0	2.3
	8.3	5.8

8 Net finance charge

	2010 £ million	2009 £ million
Finance costs on bank loans and overdrafts	(10.6)	(18.4)
Finance income on bank balances and deposits	0.5	0.4
Transfer from hedging reserve to net finance charge	–	(0.1)
	(10.1)	(18.1)

9 Taxation

	2010 £ million	2009 £ million
Analysis of charge in year
Current tax expense:
– UK corporation tax	65.8	44.3
– Double taxation relief	(21.0)	(12.4)
	44.8	31.9
– Overseas taxation	49.7	40.6
	94.5	72.5
Adjustments in respect of prior years:
– UK	(0.1)	(3.2)
– Overseas	(4.6)	(3.5)
	(4.7)	(6.7)
	89.8	65.8
Deferred taxation (Note 20):
– temporary differences arising in current year	(5.4)	4.1
– movements in respect of prior years	6.9	5.7
	91.3	75.6

	2010 £ million	2009 £ million
Tax on items charged to equity
Current tax on exchange movements offset in reserves	(1.3)	0.7
Adjustment in respect of prior years to current tax on exchange movements offset in reserves	(3.8)	–
Current tax on share-based payments	2.7	1.3
Deferred tax on IAS 39 movements	0.9	(7.9)
Deferred tax on pension liability	0.2	0.6
Deferred tax on share-based payments	11.1	4.3
	9.8	(1.0)

Variances between the current tax charge and the standard 28.0% (2009: 28.0%) UK corporate tax rate when applied to profit on ordinary activities for the year are as follows:

	2010 £ million	2009 £ million
Profit before taxation	304.4	244.0

Tax calculated at 28.0% (2009: 28.0%) standard UK corporate rate	85.2	68.3
Differences between UK and overseas tax rates	3.0	5.4
Permanent differences	1.5	0.4
Deferred tax effect of future rate changes	(0.8)	0.3
Deferred tax assets not recognised	0.2	2.3
Tax on current year profit	89.1	76.7
Prior year adjustments – current tax	(4.7)	(6.7)
Prior year adjustments – deferred tax	6.9	5.6
Total tax on profit	91.3	75.6

Effective tax rate	30.0%	31.0%

10 Dividends

	2010 £ million	2010 per share (p)	2009 £ million	2009 per share (p)
Final paid	22.1	8.23	16.9	6.28
Interim paid	17.6	6.55	11.7	4.37
	39.7	14.78	28.6	10.65

In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 December 2010 of 12.35 pence per share which will absorb an estimated £33.1 million of shareholders' funds. It will be paid on 19 May 2011 to shareholders who are on the register of members on 15 April 2011.

11 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.

	2010	2009
Profit for the year (£ million)	213.1	168.4
Weighted average number of ordinary shares in issue (million)	268.5	268.7
Basic earnings per share (pence)	79.37	62.67

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.

	2010	2009
Profit for the year (£ million)	213.1	168.4
Weighted average number of ordinary shares in issue (million)	268.5	268.7
Adjustment for share options (million)	1.3	1.0
Diluted weighted average number of ordinary shares in issue (million)	269.8	269.7
Diluted earnings per share (pence)	78.98	62.42

12 Goodwill

	2010 £ million	2009 £ million
Cost
At 1 January	51.3	53.0
Acquisitions (Note 27)	7.2	0.7
Exchange adjustments	1.9	(2.4)
At 31 December	60.4	51.3

Accumulated impairment losses	–	–

Net book value	60.4	51.3

Goodwill impairment tests

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

	2010 £ million	2009 £ million
Middle East & South East Europe	1.2	1.2
Europe	11.2	11.7
North America	40.3	31.1
International Local	6.2	5.8
Local business	58.9	49.8
International Power Projects	1.5	1.5
Group	60.4	51.3

Goodwill is tested for impairment annually or whenever there is an indication that the asset may be impaired. 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 9.3% after tax (2009: 9.8%), 12.9% before tax (2009: 13.6%) based on the weighted average cost of capital (WACC) of the Group. 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 2010, 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.

13 Other intangible assets

	2010 £ million	2009 £ million
Cost
At 1 January	24.1	22.7
Acquisitions (Note 27)	3.1	2.1
Exchange adjustments	1.7	(0.7)
At 31 December	28.9	24.1
Accumulated amortisation
At 1 January	8.6	6.1
Charge for the year	2.8	2.7
Exchange adjustments	0.5	(0.2)
At 31 December	11.9	8.6
Net book values:
At 31 December	17.0	15.5

Amortisation charges in the year comprised amortisation of assets arising from business combinations of £2.7 million (2009: £2.5 million) and amortisation of other intangible assets of £0.1 million (2009: £0.2 million). Amortisation charges in the year have been recorded in administrative expenses.

14 Property, plant and equipment

Year ended 31 December 2010
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2010	40.2	13.8	1,379.0	65.7	1,498.7
Exchange adjustments	0.4	0.6	66.3	2.2	69.5
Additions	5.7	1.6	254.4	7.1	268.8
Acquisitions (Note 27)	–	–	5.1	0.5	5.6
Disposals	(0.1)	(0.2)	(45.0)	(4.1)	(49.4)
At 31 December 2010	46.2	15.8	1,659.8	71.4	1,793.2
Accumulated depreciation
At 1 January 2010	12.7	6.7	718.7	47.6	785.7
Exchange adjustments	0.4	0.2	32.8	1.3	34.7
Charge for the year	2.3	1.4	146.8	7.8	158.3
Disposals	(0.1)	(0.2)	(40.2)	(3.8)	(44.3)
At 31 December 2010	15.3	8.1	858.1	52.9	934.4
Net book values:
At 31 December 2010	30.9	7.7	801.7	18.5	858.8
At 31 December 2009	27.5	7.1	660.3	18.1	713.0

Year ended 31 December 2009
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2009	37.9	11.9	1,382.8	64.4	1,497.0
Exchange adjustments	(1.9)	(0.6)	(90.6)	(1.4)	(94.5)
Additions	4.2	2.5	149.7	4.5	160.9
Acquisitions	–	–	1.4	–	1.4
Disposals	–	–	(64.3)	(1.8)	(66.1)
At 31 December 2009	40.2	13.8	1,379.0	65.7	1,498.7
Accumulated depreciation
At 1 January 2009	11.7	5.6	684.3	43.4	745.0
Exchange adjustments	(0.6)	(0.3)	(45.1)	(1.2)	(47.2)
Charge for the year	1.6	1.4	138.1	7.1	148.2
Disposals	–	–	(58.6)	(1.7)	(60.3)
At 31 December 2009	12.7	6.7	718.7	47.6	785.7
Net book values:
At 31 December 2009	27.5	7.1	660.3	18.1	713.0
At 31 December 2008	26.2	6.3	698.5	21.0	752.0

15 Inventories

	2010 £ million	2009 £ million
Raw materials and consumables	110.6	82.6
Work in progress	7.2	3.7
	117.8	86.3

16 Trade and other receivables

	2010 £ million	2009 £ million
Trade receivables	225.4	162.5
Less: provision for impairment of receivables	(33.4)	(26.2)
Trade receivables – net	192.0	136.3
Prepayments and accrued income	84.4	66.4
Other receivables	33.0	20.6
Total receivables	309.4	223.3

Other receivables principally comprise deposits and advance payments.

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:

	2010 £ million	2009 £ million
Sterling	17.8	10.3
Euro	37.5	29.2
US Dollar	175.0	120.7
Other currencies	79.1	63.1
	309.4	223.3

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

	2010 £ million	2009 £ million
At 1 January	26.2	25.2
Net provision for receivables impairment	9.5	7.5
Receivables written off during the year as uncollectable	(3.3)	(4.5)
Exchange	1.0	(2.0)
At 31 December	33.4	26.2

Credit quality of trade receivables

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

31 December 2010
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Middle East & South East Europe	8.5	6.2	1.7	16.4
Europe	20.0	5.7	2.6	28.3
North America	18.0	14.4	1.4	33.8
International Local	10.4	13.2	2.4	26.0
Local business	56.9	39.5	8.1	104.5
International Power Projects	32.3	63.3	25.3	120.9
Group	89.2	102.8	33.4	225.4

31 December 2009
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Middle East & South East Europe	9.7	4.6	1.4	15.7
Europe	17.6	6.4	3.6	27.6
North America	12.4	10.2	1.5	24.1
International Local	6.7	6.7	0.8	14.2
Local business	46.4	27.9	7.3	81.6
International Power Projects	22.1	39.9	18.9	80.9
Group	68.5	67.8	26.2	162.5

Trade receivables are considered impaired if they are not considered recoverable. 43% of the amounts past due are less than 30 days past due (2009: 66%).

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

Local business

Our Local business serves customers in the Middle East & South East Europe, Europe, North America, Asia, Australasia, Central & South 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 Asian Games in Guangzhou, which is included in the International Local business segment. Apart from these type of major events there are a large number of customers who are unrelated and internationally dispersed.

International Power Projects (IPP)

Our International 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 IPP business although the risk of a major default is high.

The total trade receivables balance as at 31 December 2010 for our IPP business was £120.9 million (2009: £80.9 million). Within this balance receivable balances totalling £69.5 million (2009: £43.4 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 £51.4 million (2009: £37.5 million) is deemed to be either acceptable or payment cover is not obtainable in a cost effective manner.

17 Borrowings

	2010 £ million	2009 £ million
Non-current
Bank borrowings	111.3	180.0

Current
Bank overdrafts	16.2	8.7
Bank borrowings	31.1	9.0
	47.3	17.7
Total borrowings	158.6	197.7
Short-term deposits	(6.4)	(0.5)
Cash at bank and in hand	(20.0)	(21.7)
Net borrowings	132.2	175.5

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	47.3	17.7
Between 1 and 2 years	10.1	151.1
Between 2 and 3 years	81.8	–
Between 3 and 4 years	–	28.9
Between 4 and 5 years	19.4	–
	158.6	197.7

(ii) Borrowing facilities

The Group 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

(iii) Interest rate risk profile of financial liabilities

The interest rate profile of the Group'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	–	–	–	–	–
US Dollar	13.7	93.6	107.3	4.6	5.8
Euro	0.1	17.3	17.4	5.0	2.6
Brazil Reais	16.2	–	16.2	–	–
Indian Rupees	10.1	–	10.1	–	–
Other currencies	7.6	–	7.6	–	–
At 31 December 2010	47.7	110.9	158.6

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
Brazil Reais	6.9	–	6.9	–	–
Indian Rupees	3.7	–	3.7	–	–
Other currencies	7.1	–	7.1	–	–
At 31 December 2009	90.4	107.3	197.7

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.

The effect of the Group'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) Interest rate risk profile of financial assets

	Cash at bank and in hand £ million	Short-term deposits £ million	Total £ million
Currency:
Sterling	0.1	2.1	2.2
US Dollar	5.0	2.2	7.2
Euro	1.8	2.0	3.8
South African Rand	7.1	–	7.1
Other currencies	6.0	0.1	6.1
At 31 December 2010	20.0	6.4	26.4
Currency:
Sterling	0.7	–	0.7
US Dollar	10.6	–	10.6
Euro	4.7	–	4.7
South African Rand	0.5	–	0.5
Other currencies	5.2	0.5	5.7
At 31 December 2009	21.7	0.5	22.2

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

2010

Number

2010

£000

2009

Number

2009

£000

Authorised:

Redeemable preference shares of 25p each

199,998

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.

18 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 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. 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 Group's operations:
Current borrowings and overdrafts	(47.3)	(47.3)	(17.7)	(17.7)
Non-current borrowings	(111.3)	(111.3)	(180.0)	(180.0)
Short-term deposits	6.4	6.4	0.5	0.5
Cash at bank and in hand	20.0	20.0	21.7	21.7
Derivative financial instruments held:
Interest rate swaps	(9.5)	(9.5)	(6.7)	(6.7)
Forward foreign currency contracts	(0.9)	(0.9)	–	–

(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/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 bank loans and other loans, the fair value approximates to the carrying value reported in the balance sheet as all debt is raised on a floating rate basis 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
Current:
Interest rate swaps – cash flow hedge	–	(1.1)	–	–
Forward foreign currency contracts – cash flow hedge	0.1	(1.0)	–	–
Non-current:
Interest rate swaps – cash flow hedge	–	(8.4)	–	(6.7)
	0.1	(10.5)	–	(6.7)

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:

	2010 £ million	2009 £ million
Contracts with negative fair values:
Interest rate swaps	(9.5)	(6.7)
Forward foreign currency contracts	(0.9)	–
	(10.4)	(6.7)

The net fair value losses at 31 December 2010 on open forward exchange contracts that hedge the foreign currency risk of future anticipated expenditure are £0.9 million (2009: £nil). These will be allocated to the cost of the asset as a basis adjustment when the forecast capital expenditure occurs. The net fair value liability at 31 December 2010 on open interest swaps that hedge interest risk are £9.5 million (2009: liability of £6.7 million). These will be debited to the income statement interest charge over the remaining life of each interest rate swap.

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 and Euro denominated borrowings. The fair value of the US Dollar borrowings at 31 December 2010 was £107.1 million (2009: £108.1 million), and the Euro borrowings £17.3 million (2009: £32.9 million). The foreign exchange loss of £2.8 million (2009: loss of £24.2 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 2010
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	47.3	111.3	–	158.6
Effect of interest rate swaps	(29.0)	(17.3)	(64.6)	(110.9)
	18.3	94.0	(64.6)	47.7

As at 31 December 2009
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	17.7	180.0	–	197.7
Effect of interest rate swaps	–	(45.6)	(61.7)	(107.3)
	17.7	134.4	(61.7)	90.4

As at 31 December 2010 and 31 December 2009 all of the Group's debt was exposed to repricing within 3 months of the balance sheet date. £29.0 million of interest rate swaps are due to mature in 2011. The Group's interest rate swap portfolio is reviewed on a regular basis to ensure it is consistent with Group policy as described in the Interest rate risk in Note 1.

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

	2010	2009
Bank overdraft	10.9%	9.0%
Bank borrowings	2.3%	1.3%

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 2010
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	47.3	10.1	101.2	–
Derivative financial instruments	2.1	–	1.5	6.9
Trade and other payables	114.3	–	3.1	–
	163.7	10.1	105.8	6.9

As at 31 December 2009
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	17.7	153.0	29.9	–
Derivative financial instruments	–	1.9	1.6	3.2
Trade and other payables	69.9	–	–	–
	87.6	154.9	31.5	3.2

No trade payable balances have a contractual maturity greater than 90 days. In respect of suppliers, the Group had approximately 86 days (2009: 63 days) credit outstanding as at the balance sheet date.

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 2010
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	50.7
Inflow	(49.8)
	0.9

As at 31 December 2009
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	–
Inflow	–
	–

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

19 Trade and other payables

	2010 £ million	2009 £ million
Trade payables	112.7	68.5
Other taxation and social security payable	5.4	2.9
Other payables	31.0	19.9
Accruals and deferred income	159.6	128.6
	308.7	219.9

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

20 Deferred tax

	2010 £ million	2009 £ million
At 1 January	(29.5)	(19.8)
Impact of reduction in UK CT rate to 27% from 1 April 2011	0.8	–
Charge to the income statement (Note 9)	(2.3)	(9.8)
Credit/(charge) to equity	12.2	(3.0)
Exchange differences	(1.5)	3.1
At 31 December	(20.3)	(29.5)

The proposed reductions in the main rate of UK corporation tax by 1 per cent per year to 24 per cent by 1 April 2014 are expected to be enacted separately each year. The overall effect of the changes from 27 per cent to 24 per cent, if these applied to the deferred tax balance at 31 December 2010 would be to reduce the deferred tax liability by approximately £0.9 million (being £0.3 million recognised in 2012, £0.3 million recognised in 2013 and £0.3 million recognised in 2014).

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 £3.1 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 £1.4 million (2009: £4.2 million) of which £1.4 million (2009: £4.2 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 £3.2 million (2009: £2.6 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 2010	(48.0)	11.9	(36.1)
(Charge)/credit to the income statement	(16.3)	9.8	(6.5)
Credit to equity	–	12.2	12.2
Exchange differences	(1.5)	–	(1.5)
At 31 December 2010	(65.8)	33.9	(31.9)

Deferred tax assets
	Accelerated capital depreciation £ million	Other temporary differences £ million	Total £ million
At 1 January 2010	(0.5)	7.1	6.6
Credit to the income statement	4.3	0.7	5.0
At 31 December 2010	3.8	7.8	11.6

The net deferred tax liability due after more than one year is £20.3 million (2009: £29.5 million).

21 Share capital

Allotted, called up and fully paid:
	2010 Number of shares	2010 £000	2009 Number of shares	2009 £000
Ordinary shares of 20p each
At 1 January	273,473,338	54,695	272,116,594	54,424
Employee share option scheme	844,933	169	1,356,744	271
At 31 December	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.

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.

The options under the Executive Share Option Scheme are normally only exercisable once three years have elapsed from date of grant and lapse after ten years. All Executive Options are subject to performance conditions based on both total shareholder return ('TSR') and growth in Earnings Per Share ('EPS'). TSR is calculated by reference to the increase in the Company's share price plus dividends paid. EPS is Basic Earnings Per Share as disclosed in the consolidated income statement. At the time when the individual wishes to exercise the option, the growth in the Company's TSR is compared to that of the FTSE Mid 250 Index (excluding investment trusts) over a specified period. If the Company's TSR matches or exceeds that index, and the Company's EPS growth matches or exceeds the growth in the Retail Prices Index plus 3% per annum, over three consecutive years, the option is capable of exercise. Retesting of performance conditions is limited to six monthly intervals between 3 and 5 years after the date of grant. For Executive Share Options granted prior to 25 April 2001, at the time when the individual wishes to exercise the option, the Company's TSR since the date of grant of the option is compared to that of the FTSE Mid 250 Index (excluding investment trusts). If the Company's TSR matches or exceeds that index, and the Company's annual EPS growth matches or exceeds the growth in the Retail Prices Index plus 3% per annum, over three consecutive years, the option is capable of exercise.

There is no legal obligation upon the Company to satisfy the options existing under the Savings-Related and Executive 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 in the Remuneration Report section.

Aggreko has taken the IFRS 1 exemption to apply IFRS 2 'Share-based Payment' only to options that were granted after 7 November 2002 and were not vested at 1 January 2005.

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	12-Nov-04	11-Nov-05	11-Nov-05	10-Nov-06	10-Nov-06	10-Nov-06	9-Nov-07	9-Nov-07
Share price at grant date (£)	1.6	2.5	2.5	3.7	3.7	3.7	5.7	5.7
Option price (£)	1.2	1.9	1.9	2.8	2.8	2.9	5.0	5.0
Number granted	202,541	143,559	33,118	308,910	109,230	19,433	264,698	84,907
Vesting period (years)	5.0	5.0	5.0	3.0	5.0	5.0	3.0	5.0
Expected volatility (%)	42.3	40.5	40.5	26.8	40.6	40.6	32.0	26.8
Expected life (years)	5.3	5.3	5.3	3.3	5.3	5.3	3.3	5.3
Risk free rate (%)	4.6	4.5	4.5	4.9	4.8	4.8	4.7	4.7
Expectation of employees meeting performance criteria	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
Expected dividends expressed as a dividend yield (%)	3.7	2.4	2.4	1.7	1.7	1.7	1.3	1.3
Fair value per option (£)	0.6	1.1	1.1	1.3	1.7	1.7	1.8	2.0

Grant type	Sharesave	US Stock Plan	Sharesave	Sharesave	Sharesave	US Stock Plan	Sharesave	Sharesave
Grant date	9-Nov-07	9-Nov-07	31-Oct-08	31-Oct-08	31-Oct-08	29-Oct-08	30-Oct-09	30-Oct-09
Share price at grant date (£)	5.7	5.7	4.3	4.3	4.3	3.8	7.6	7.6
Option price (£)	4.9	4.9	4.4	4.4	4.4	3.2	5.5	5.5
Number granted	9,792	93,503	567,259	211,082	44,223	317,923	281,110	70,609
Vesting period (years)	4.0	2.0	3.0	5.0	4.0	2.0	3.0	5.0
Expected volatility (%)	26.8	26.7	36.1	32.4	33.4	38.9	42.6	37.0
Expected life (years)	4.3	2.1	3.3	5.3	4.3	2.1	3.3	5.3
Risk free rate (%)	4.7	4.8	3.4	3.8	3.6	3.0	2.2	2.8
Expectation of employees meeting performance criteria	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
Expected dividends expressed as a dividend yield (%)	1.3	1.3	2.0	2.0	2.0	2.3	1.4	1.4
Fair value per option	1.9	1.5	1.1	1.2	1.2	1.1	3.1	3.3

Grant type	Sharesave	US Stock Plan	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	30-Oct-09	30-Oct-09	20-Nov-09	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10
Share price at grant date (£)	7.6	7.6	7.5	16.8	16.8	16.8	16.8	16.8
Option price (£)	5.5	6.5	5.5	12.4	12.4	12.9	12.4	12.4
Number granted	8,439	83,435	16,577	48,187	111,294	3,119	13,793	21,402
Vesting period (years)	4.0	2.0	3.0	3.0	3.0	4.0	5.0	5.0
Expected volatility (%)	39.7	48.4	42.6	43.4	43.4	40.0	38.1	38.1
Expected life (years)	4.3	2.1	1.4	3.2	3.2	4.2	5.2	5.2
Risk free rate (%)	2.5	0.9	2.1	1.0	1.0	1.4	1.7	1.7
Expectation of employees meeting performance criteria	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
Expected dividends expressed as a dividend yield (%)	1.4	1.4	1.4	0.9	0.9	0.9	0.9	0.9
Fair value per option	3.2	2.5	3.0	6.8	6.8	6.8	7.3	7.3

Grant type	Sharesave	US Stock Plan
Grant date	25-Oct-10	25-Oct-10
Share price at grant date (£)	16.8	16.8
Option price (£)	12.9	14.3
Number granted	3,962	54,800
Vesting period (years)	5.0	2.0
Expected volatility (%)	38.1	45.2
Expected life (years)	5.2	2.1
Risk free rate (%)	1.7	0.8
Expectation of employees meeting performance criteria	n/a	n/a
Expected dividends expressed as a dividend yield (%)	0.9	0.9
Fair value per option	7.1	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 (£)	Executive share option 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 2010	1,962,415	4.04	10,000	4.28	372,733	3.95	1,936,316	nil
Granted	201,757	12.41	–	–	54,800	14.32	509,320	nil
Exercised	(390,069)	2.21	(10,000)	4.28	(231,458)	3.26	(213,406)	nil
Lapsed	(128,815)	4.58	–	–	(39,944)	4.32	(125,938)	nil
Outstanding at 31 December 2010	1,645,288	5.44	–	–	156,131	3.57	2,106,292	nil
Weighted average contractual life (years)	2		–		1		1

The weighted average share price during the year for options exercised over the year was £2.63 (2009: £3.12). The total charge for the year relating to employee share based payment plans was £18.7 million (2009: £9.2 million), all of which related to equity-settled share based payment transactions.

Options and awards outstanding over Ordinary shares as at 31 December 2010 (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	2010 Number	2009 Number	Market price (£)¹
Executive Share Option Scheme – Aug 2000	4.28	Aug 2003	Aug 2010	–	10,000	4.28
Sharesave – Nov 2004	1.17	Nov 2009	May 2010	–	126,710	1.55
Sharesave – Nov 2005	1.89	Nov 2010	May 2011	75,991	96,553	2.50
	1.90	Nov 2010	May 2011	19,963	19,963	2.50
Sharesave – Nov 2006	2.82	Nov 2009	May 2010	–	253,974	3.74
	2.82	Nov 2011	May 2012	77,206	80,328	3.74
	2.87	Nov 2011	May 2012	16,985	18,515	3.74
Long-term Incentive Plan – Apr 2007	–	Apr 2010	Oct 2010	–	222,346	5.20
US Stock Option Plan – Nov 2007	4.87	Nov 2009	Feb 2010	–	7,713	5.73
Sharesave – Nov 2007	5.04	Nov 2010	May 2011	157,584	166,490	5.73
	4.91	Nov 2011	May 2012	5,402	5,402	5.73
	5.04	Nov 2012	May 2013	31,435	47,164	5.73
	4.91	Nov 2012	May 2013	4,390	4,390	5.73
Long-term Incentive Plan – Apr 2008	–	Apr 2011	Oct 2011	717,198	758,046	5.94
US Stock Option Plan – Oct 2008	3.20	Oct 2010	Jan 2011	29,822	281,585	3.76
Sharesave – Oct 2008	4.37	Oct 2011	Apr 2012	481,063	532,927	4.33
	4.37	Oct 2012	Apr 2013	28,309	29,264	4.33
	4.37	Oct 2013	Apr 2014	185,599	190,377	4.33
	4.37	Oct 2013	Apr 2014	12,426	13,623	4.33
Long-term Incentive Plan – Apr 2009	–	Apr 2012	Oct 2012	879,774	955,924	5.23
US Stock Option Plan – Oct 2009	US$10.64	Nov 2011	Jan 2012	71,509	83,435	7.60
Sharesave UK 3 year – Oct 2009	5.53	Jan 2013	Jun 2013	103,098	110,309	7.60
Sharesave International 3 year	US$8.77	Jan 2013	Jun 2013	130,673	142,046	7.60
– Oct 2009	US$8.77	Jan 2013	Jun 2013	16,577	16,577	7.60
	€6.02	Jan 2013	Jun 2013	22,232	23,278	7.60
	CAD$9.53	Jan 2013	Jun 2013	4,420	5,477	7.60
Sharesave French 4 year – Oct 2009	€6.02	Jan 2014	Jun 2014	7,865	8,439	7.60
Sharesave UK 5 year – Oct 2009	5.53	Jan 2015	Jun 2015	30,930	35,090	7.60
Sharesave International 5 year	US$8.77	Jan 2015	Jun 2015	31,151	32,909	7.60
– Oct 2009	€6.02	Jan 2015	Jun 2015	1,893	2,610	7.60
Long Term Incentive Plan – Apr 2010	–	Apr 2013	Oct 2013	509,320	–	11.89
US Stock Option Plan – Oct 2010	US$22.52	Nov 2011	Jan 2012	54,800	–	16.85
Sharesave UK 3 year – Oct 2010	12.39	Jan 2013	Jun 2013	48,187	–	16.85
Sharesave International 3 year	US$19.57	Jan 2013	Jun 2013	95,018	–	16.85
– Oct 2010	CAD$20.21	Jan 2013	Jun 2013	1,359	–	16.85
	AU$20.21	Jan 2013	Jun 2013	6,954	–	16.85
	€14.39	Jan 2013	Jun 2013	7,530	–	16.85
Sharesave French 4 year – Oct 2010	€14.52	Jan 2014	Jun 2014	3,119	–	16.85
Sharesave UK 5 year – Oct 2010	12.39	Jan 2015	Jun 2015	12,565	–	16.85
Sharesave International 5 year	US$19.57	Jan 2015	Jun 2015	13,473	–	16.85
– Oct 2010	CAD$20.21	Jan 2015	Jun 2015	296	–	16.85
	AU$20.21	Jan 2015	Jun 2015	7,217	–	16.85
	€14.39	Jan 2015	Jun 2015	416	–	16.85
Sharesave French 5 year – Oct 2010	€14.52	Jan 2015	Jun 2015	3,962	–	16.85
				3,907,711	4,281,464

¹ Market price as at the date of grant.

22 Treasury shares

2010

£ million

2009

£ million

Treasury shares

(49.6)

(25.8)

Interests in own shares represent the cost of 6,087,304 of the Company's ordinary shares (nominal value 20 pence) (31 December 2009: 4,422,419). In April 2010, 1,892,728 shares were acquired (2009: 1,529,280 shares acquired) by the Trust on the open market and 393,433 (2009: nil) were acquired from participants in the Long-term Incentive Plan at market rates. During the year 621,276 shares were allotted (2009: 931,895 shares allotted) to participants in the Long-term Incentive Plan. These shares represent 2.2% of issued share capital as at 31 December 2010 (2009: 1.6%).

These shares were acquired by the 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 2010 was £90.2 million (31 December 2009: £41.1 million).

23 Capital commitments

2010

£ million

2009

£ million

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

33.9

8.3

24 Operating lease commitments – minimum lease payments

	2010		2009
	Land and buildings £ million	Plant, equipment and vehicles £ million	Land and buildings £ million	Plant, equipment and vehicles £ million
Commitments under operating leases expiring:
Within 1 year	9.1	9.0	8.9	7.8
Later than 1 year and less than 5 years	17.8	10.8	15.4	10.0
After 5 years	9.0	–	7.3	–
Total	35.9	19.8	31.6	17.8

25 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 2010 was £4.3 million (2009: £4.2 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 2008 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	4.8%
Rate of increase in salaries	4.6%
Increase in pensions	3.1%

At the valuation date, the market value of the Scheme's assets (excluding AVCs) was £32.6 million which was sufficient to cover 67% of the benefits that had accrued to members, after making allowances for future increases in earnings.

As part of the valuation at 31 December 2008, the Company and the trustees agreed upon a Schedule of Contributions and a Recovery Plan. From 1 January 2010 to 31 March 2010 the company paid contributions for benefits building up in future at a rate of 25.4% of pensionable earnings and from 1 April 2010 the company paid 28.0% of pensionable earnings plus administration costs. To address the Scheme deficit the Group made additional contributions of £3.5 million in December 2010. The company plans to make further additional contributions of £2.5 million in 2011 and £0.6 million in subsequent years until 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 (2009: £0.7 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 2010	31 Dec 2009
Rate of increase in salaries	5.2%	5.4%
Rate of increase in pensions in payment	3.5%	3.7%
Rate of increase in deferred pensions	3.7%	3.9%
Discount rate	5.3%	5.7%
Inflation assumption	3.7%	3.9%
Expected return on Scheme assets	5.4%	5.2%
Longevity at age 65 for current pensioners (years)
Men	23.5	23.5
Women	26.4	26.4
Longevity at age 65 for future pensioners (years)
Men	25.3	25.3
Women	28.1	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 2010	Value at 31 Dec 2010 £ million	Long term rate of return expected at 31 Dec 2009	Value at 31 Dec 2009 £ million	Long term rate of return expected at 31 Dec 2008	Value at 31 Dec 2008 £ million
Equities	6.6%	24.5	6.9%	21.4	6.4%	17.2
Property	6.6%	5.0	n/a	n/a	n/a	n/a
Gilts	3.6%	11.1	3.9%	5.1	3.4%	5.4
Bonds	4.8%	10.3	5.2%	11.0	6.4%	7.7
Cash	0.0%	2.1	0.0%	5.3	1.5%	2.3
Total		53.0		42.8		32.6

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:

	2010 £ million	2009 £ million	2008 £ million
Fair value of assets	53.0	42.8	32.6
Present value of funded obligations	(56.2)	(48.6)	(40.6)
Liability recognised in the Balance Sheet	(3.2)	(5.8)	(8.0)

An alternative method of valuation is the estimated cost of buying out benefits at 31 December 2010 with a suitable insurer. This amount represents the amount that would be required to settle the Scheme liabilities at 31 December 2010 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 2010 is around £75 million which gives a Scheme shortfall on a buyout basis of approximately £22 million.

The amounts recognised in the income statement are as follows:

	2010 £ million	2009 £ million
Current service costs	1.7	1.2
Interest cost	2.8	2.2
Expected return on Scheme assets	(2.3)	(1.9)
	2.2	1.5

Of the total charge of £2.2 million, £0.6 million (2009: £0.4 million) and £1.6 million (2009: £1.1 million) were included, respectively in cost of sales and administrative expenses.

Changes in the present value of the defined benefit obligation are as follows:
	2010 £ million	2009 £ million
Present value of obligation at 1 January	48.6	40.6
Service cost	1.7	1.2
Interest cost	2.8	2.2
Contributions from Scheme members	0.4	0.4
Benefits paid	(0.5)	(0.7)
Actuarial losses	3.2	4.9
Present value of obligation at 31 December	56.2	48.6

Present value of Scheme assets are as follows:
	2010 £ million	2009 £ million
Fair value of Scheme assets at 1 January	42.8	32.6
Expected return on Scheme assets	2.3	1.9
Employer contributions	5.4	5.8
Contributions from Scheme members	0.4	0.4
Benefits paid	(0.5)	(0.7)
Actuarial gains	2.6	2.8
Fair value of Scheme assets at 31 December	53.0	42.8

Analysis of the movement in the balance sheet
	2010 £ million	2009 £ million
At 1 January	(5.8)	(8.0)
Total expense as above	(2.2)	(1.5)
Contributions	5.4	5.8
Net actuarial losses	(0.6)	(2.1)
At 31 December	(3.2)	(5.8)

Cumulative actuarial gains and losses recognised in equity
	2010 £ million	2009 £ million
At 1 January	22.5	20.4
Actuarial losses recognised in the year	0.6	2.1
At 31 December	23.1	22.5

The actual return on Scheme assets was a gain of £4.9 million (2009: gain of £4.7 million).

History of experience gains and losses

	2010	2009	2008	2007	2006
Experience adjustments arising on Scheme assets:
Amount (£m)	2.6	2.8	(7.9)	(0.3)	–
Percentage of Scheme assets	4.9%	6.5%	(24.2%)	(1.0%)	0.0%

Experience adjustments arising on Scheme liabilities:
Amount (£m)	–	1.1	–	–	(0.5)
Percentage of present value Scheme liabilities	0.0%	2.3%	0.0%	0.0%	(1.0%)

Present value of Scheme liabilities (£m)	56.2	48.6	40.6	40.7	37.4

Fair value of Scheme assets (£m)	53.0	42.8	32.6	32.6	24.3
Deficit (£m)	3.2	5.8	8.0	8.1	13.1

The contributions expected to be paid during the financial year ending 31 December 2011 amount to £4.2 million.

26 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
Aggreko Generator Rentals Pty Limited		Australia
Aggreko Barbados Limited		Barbados
Aggreko Belgium NV		Belgium
Aggreko Energia Locacao de Geradores Ltda		Brazil
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 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 Energy Ecuador CIA		Ecuador
Aggreko Finland Oy		Finland
Aggreko France SARL		France
Aggreko Deutschland GmbH		Germany
Aggreko Hong Kong Limited		Hong Kong
Aggreko Energy Rental India Private Limited +++		India
Aggreko Ireland Limited		Ireland
Aggreko Italia S.R.L		Italy
Aggreko Malaysia SDN BHD		Malaysia
Aggreko Energy Mexico SA de CV		Mexico
Aggreko Services Mexico SA de CV		Mexico
Aggreko SA de CV ++++		Mexico
Aggreko (NZ) Limited		New Zealand
Aggreko Projects Limited		Nigeria
Aggreko Gas Power Generation Limited ++++		Nigeria
Aggreko Norway AS		Norway

Aggreko Generator Rentals (PNG) Limited++++		Papua New Guinea
Aggreko Peru S.A.C.		Peru
Aggreko Trinidad Limited	Republic of Trinidad & Tobago
OOO Aggreko Eurasia		Russia
Aggreko (Singapore) PTE Limited		Singapore
Aggreko Energy Rental South Africa (Proprietary) Limited		South Africa
Aggreko Iberia SA		Spain
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 Finance Limited +		UK
Aggreko Holdings Limited +		UK
Aggreko European Finance ++		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
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	*** Registered in the Netherlands
+ Intermediate Holding Company	++ Finance Company
+++ The financial year end of Aggreko Energy Rental India Private Limited is 31 March due to local taxation requirements
++++ Dormant Company

27 Acquisition of Northland Power Services

On 3 December 2010 the Group completed the acquisition of the business and assets of Northland Power Services. The purchase consideration, paid in cash, comprises a fixed element of $23.7 million (£15.4 million) and further payments up to a maximum of $2.0 million (£1.3 million) dependant on financial performance during 2011. The total £1.3 million has been accrued as this is considered the most likely outcome. The business acquired had revenue in 2010 of £7.7 million and operating profit of £0.8 million.

The acquisition method of accounting has been adopted and the goodwill arising on the purchase has been capitalised.

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

	Initial book value £ million	Restatement to fair value £ million	Fair value £ million
Intangible assets	–	3.1	3.1
Property, plant and equipment	6.9	(1.3)	5.6
Inventories	0.2	–	0.2
Trade and other receivables	1.0	0.2	1.2
Trade and other payables	(0.6)	–	(0.6)
Net assets acquired	7.5	2.0	9.5
Goodwill			7.2
Consideration			16.7
Less contingent consideration			(1.3)
Net cash outflow			15.4

Intangible assets represent customer relationships and a non-compete agreement. Goodwill represents the value of synergies arising from the integration of the acquired business. Synergies include improved penetration into the oil and gas sector, increased knowledge of unconventional oil and gas applications as well as direct cost savings and the reduction of overheads.

28 Events occurring after the balance sheet date

On 7 March 2011 the Group entered into an agreement to acquire the business and assets of N.Z. Generator Hire Limited for a total cash consideration of £12.7 million. This business had revenue in 2010 of £6.0 million, operating profit of £1.1 million and net assets with a book value at 31 December 2010 of £10.4 million. The net assets were fleet assets and working capital. Given the timing of the transaction the fair value exercise will be completed during 2011.

Notes to the Group Accounts

1 Accounting policies

Basis of preparation

Changes in accounting policy and disclosures

Basis of consolidation

Revenue recognition

Segmental reporting

Leases

Exceptional items

Property, plant and equipment

Capital grants

Intangibles

Goodwill

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

Foreign currencies

Derivative financial instruments

Taxation

Inventories

Employee benefits

Trade receivables

Trade payables

Provisions

Share-based payments

Cash and cash equivalents

Borrowings

Dividend distribution

Key assumptions and significant judgements

Financial risk management

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

(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 Employees and Directors

8 Net finance charge

9 Taxation

10 Dividends

11 Earnings per share

12 Goodwill

13 Other intangible assets

14 Property, plant and equipment

15 Inventories

16 Trade and other receivables

17 Borrowings

18 Financial instruments

19 Trade and other payables

20 Deferred tax

21 Share capital

Share options

22 Treasury shares

23 Capital commitments

24 Operating lease commitments – minimum lease payments

25 Pension commitments

26 Significant investments

27 Acquisition of Northland Power Services

28 Events occurring after the balance sheet date

Accounts

4 Segmental reporting
(a) Revenue by segment