Chairman’s Message - ADSSC Documents/Anual Report2… · · 2014-10-28Chairman’s Message...
Transcript of Chairman’s Message - ADSSC Documents/Anual Report2… · · 2014-10-28Chairman’s Message...
Chairman’s Message
Company Profile
2007 Major Achievements & Activities
Future Plans
Director’s Report & Financial Statements
Accounting Statements
Table of
Content
1
Contents
3
7
17
31
37
71
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Sustainability • Capability • Service
H.H. Sheikh Diab Bin Zayed Al Nahyan - Chairman of ADSSC
3
I am pleased to endorse the Abu Dhabi Sewerage
Services Company (ADSSC) 2007 Annual Report.
Considerable progress has been made since the
publication of the 2006 Annual Report, covering
first 18-months of activities.
Internally, we focused on improving the
organizational efficiency and processes. This was
in line with the directives issued by the Abu Dhabi
Executive Council. Strategic business planning
and performance management frameworks
stipulated by the Abu Dhabi Executive Council
were successfully implemented with the issuance
of the 1st ADSSC 5-year Strategic Plan (2008-2012)
in November last year.
In order to meet the long-term strategic
objectives of the Emirate of Abu Dhabi, ADSSC
prepared and issued a 25-year Master Plan during
2007. This was prior to the issuance of Abu Dhabi
Plan 2030, which outlined the Government’s
future plans. An independent study confirmed
that ADSSC 25-year master plan was fully aligned
with Abu Dhabi Plan 2030.
Externally, ADSSC enhanced its collaboration with
the relevant stakeholders and regulators, to ensure
that its corporate objectives encompassed all
requirements.
Future outlook looks very bright yet challenging.
With the rate of population and economic growth
we are convinced that with a robust planning and
performance framework, ADSSC will meet and
exceed our expectations.
Chairman’s
Message
4
Sustainability • Capability • Service
Alan Thomson Managing Director
5
Board of
Directors
The Chairman of the Board is His Highness Sheikh Diab Bin Zayed Al Nahyan
The other Members of the Board are:
• His Excellency Ahmed Saif Al Darmaki
• Dr. Abdulla N. Al Suwaidi
• Mr. Abdullah Saif Al Nuaimi
• Dr. Hassan Al Hossani
• Mr. Alan Thomson
ADSSC was established in June 2005 as a wholly owned subsidiary of the Abu
Dhabi Water & Electricity Authority (ADWEA) for the provision of sewerage services
in the Emirate of Abu Dhabi. ADSSC business is to collect and treat wastewater
discharged from all residential and commercial customers in the Emirate of Abu
Dhabi and safely dispose both the solid and liquid waste thereof.
An integral part of the ADWEA valuechain, ADSSC services are invisible, safe,
odourless and environmentally friendly.
Corporate objectives are to:
• Ensure availability of reliable services
• Operate existing infrastructure, effectively and efficiently
• Deliver large number of infrastructure projects to meet growth demands
• Enhance the health, safety and environment of the Emirate of Abu Dhabi
• Attract and develop a skilled workforce
• Partner, engage and collaborate with all stakeholders
Company
Profile
6
Sustainability • Capability • Service
ADSSC Mafraq waste water treatment plantADSSC Head Office Team Members
7
State-of-the-art wastewater treatment
methodologies are used at ADSSC’s
wastewater treatment plants strategically
located in Abu Dhabi, Al Ain and the
Western Region. Average daily flows during
2007 at the wastewater treatment plant at
Mafraq (Abu Dhabi) stood at 390,252 cubic
meters and 108,964 cubic meters at Zakher
(Al Ain).
The current sewerage infrastructure was
designed based upon earlier projections
and is severely overloaded. Rehabilitation,
refurbishment, renewal and construction
of requisite infrastructure is underway,
in order to meet the current and future
requirements.
ADSSC provides treated wastewater
and biosolids to the municipalities for
horticulture purposes. At end of 2007,
ADSSC was supplying 65% of the recycled
water ( TSE) to the municipalit ies for
irrigation purposes, thereby, contributing
towards environmental preservation. All the
TSE is available for reuse. The availability
of distribution network is the limiting factor.
ADSSC workforce comprised of 800
employees in December 2007, with 16%
UAE Nationals.
Company
Profile
8
Sustainability • Capability • Service
Abu Dhabi parks kept green with ADSSC recycled water
9
Customers Connections – Dec 2007
Abu Dhabi Al Ain
Agricultural 89 402
Commercial 28,542 3,789
Government 3,730 669
Industrial 7 2
Internal 228 17
Municipal 62 949
Prepaid 3 2
Residential 145,852 44,501
Total Customers 178,513 50,331
Assets – as of December 2007
Collection Treatment
Abu Dhabi Al Ain Mafraq Zakher
Pumping Stations 185 63 Original Capacity 105,000 (1982) 27,000 (1980)
(m3/day)
Trunk Sewers (Km) 180 142 Current Rated Capacity 340,000 (2002) 54,000 (1992)
(m3/day)
Collection 3000 2400 Current Flow 390,000 109,000
sewers (Km) (m3/day)
10
Sustainability • Capability • Service
ADSSC wastewater treatment facility at Mafraq
11
In an endeavour to improve organizational effectiveness and efficiency, ADSSC
organizational structure is continuously reviewed and revised.
Business Support Department was created with the following responsibilities,
with a direct reporting line to the Managing Director:
1. Business Planning
2. Performance Reporting
3. Information Systems
4. License & Business Coordination
5. Quality, Health, Safety & Environment
ADSSC organizational structure as of December 2007 is shown below:
Organization
Managing Director
Senior ExecutiveManagement
Assistant
Regulation AdvisorHSE Specialist
QA SpecialistLegal Advisor
Deputy Managing
Director
Finance Department
Manager
HR & Admin
Department Manager
Supply Department
Manager
Customer Services
Department Manager
Asset Management
Division Manager
Operation & Maintenance
Division Manager
Projects Division
Manager
Business Support
Department Manager
12
Sustainability • Capability • Service
ADSSC treated wastewater keeps Abu Dhabi green
13
Vision
To be recognized by communities, businesses and regulators as a best value
service provider for the development of the Emirate of Abu Dhabi.
Mission
To achieve excellence in the provision of a high quality, cost effective sewerage
service in the Emirate of Abu Dhabi. We will achieve this by working together in
an integrated, customer focused organization.
Vision, Mission
14
Sustainability • Capability • Service
Female UAE Nationals hold prominent management positions at ADSSC
15
Values
Communication
We communicate to our colleagues all relevant
information and ensure that our customers know our
contact details
Teamwork
We respect our colleagues and ensure that they are
included in all aspects of our work
Service
We expect to provide and deliver top quality service to
all customers
Honesty
We are open and honest in all our work and exhibit the
highest levels of integrity
Innovation
We are open to new systems, ideas and developments
and do not rely on old methods
Respect
We treat everyone with respect and listen to their views
in a constructive and positive manner
Expertise
We recognise the importance of business experience
and knowledge and ensure that training is planned to
keep in touch with development
Accountability
We expect all colleagues to be accountable for their
own actions and decisions and to accept their own
responsibilities
Caring
We will endeavour to ensure that our colleagues are
employed in a safe and caring environment where
standards are maintained at a high level
•
•
•
•
•
•
•
•
•
1616
Sustainability • Capability • Service
ADSSC is transforming the Abu Dhabi landscape via provision of treated wastewater
1717
Abu Dhabi Sewerage Services Company PJSC
2007 Major Achievements & Activities
1818
Sustainability • Capability • Service
Abu Dhabi parks kept green with ADSSC recycled water
1919
ADSSC 25-year Master Plan was finalized, to meet the aggressive population
growth of the Emirate and ensure that requisite sewerage infrastructure is available
on time. Main project drivers were the need for integrating planning documents
originating from the municipalities / town planning departments; current sewerage
system assessment; financial forecast to upgrade existing assets / build new
infrastructure.
Immediate measures, short-term measures, mid-term measures and long-term
measures were identified, including but not limited to:
• Forecast future treatment capacities
• Maintenance / extension of existing network
• Collection and treatment infrastructure needed to cater to flows from new
development projects
• Design and cost aspects of key investment schemes reviewed
• Investment portfolio conceptualized
• Hydraulic modeling (400 mm and above)
2007 MajorAchievements &
Activities
ADSSC wastewater treatment facility
2020
Sustainability • Capability • Service
ADSSC treated wastewater keeps Abu Dhabi green
2121
As an outcome of the ADSSC 25-year Master Plan
recommendations, specific actions were taken, leading to:
Build-own-operate-transfer (BOOT) approach was
adopted for 4-new wastewater treatment works.
Associated activities were in progress at end of
2007
Program Management Office (PMO) methodology
proposed to ensure effective implementation of the
capital investment program
Infrastructure development agreements (IDA) and
memorandum of understandings (MOU) developed
with major developers in Abu Dhabi
Strategic Investment Program (SIP) and Tactical
Investment Program (TIP) consultancy tendering work
was in progress in 2007
PMO appointment was finalized by ADSSC in 2007
and recommendations forwarded to ADWEA and the
Executive Council
Asset Register was prepared in collaboration with
specialist consultants, with approximately 500,000
data entries
Standard and Specifications project was initiated
Strategic Business Planning and Performance
Management (BPPM) consultancy contract was
awarded to Ernst & Young
•
•
•
2007 MajorAchievements &
Activities
2222
Sustainability • Capability • Service
ADSSC 2008-2012 Strategic Plan was prepared and issued in accordance with
Abu Dhabi Executive Council guidelines
Quarterly Performance Review process initiated by Abu Dhabi Executive Council
Business Process Mapping & Risk Assessment (BPRA) project terms of reference
developed and discussions initiated with Ernst & Young, in order to improve internal
effectiveness and efficiency
Integrated Management System - IMS (ISO 9001, ISO 14001, OSHAS 18001) design,
development and implementation project awarded to Bureau Veritas. Project launch
and ISO certifications planned for 2008
ADSSC O&M Contractors at work
2323
2007 MajorAchievements &
Activities
Accounting statements prepared in accordance
with Article 3, ADSSC License Condition 8, under
the Sewerage, Wastewater Treatment and Disposal
categories. Audited and approved accounts are
included with this 2007 Annual Report
Projects valued at AED 423 million were completed
(final acceptance certificate issued) and AED 400
million worth new contracts awarded
Exist ing nine Operations & Maintenance
contracts were reviewed with the objective of
enhancing effectiveness and efficiency.
Consequently, four new performance-based contracts
were developed. These new contracts will become
operational at all ADSSC facilities in Abu Dhabi Emirate
in early 2008
Substantial progress made towards outsourcing
of all O & M activities in Al Ain prepared to commence
in early 2008
Successfully resolved challenges associated with
re-deployment and / or disengagement of 400-450 Al
Ain based O & M employees projected during 2008
2424
Sustainability • Capability • Service
Month
Influent (m3/d)
Effluent (m3/d)
Design (m3/d)
Mafraq Flow Production - 2007
m3
/da
y
450,000
300,000
200,000
Jan
345,968
339,571
260,625
Feb
353,785
348,191
260,625
Mar
364,172
334,836
260,625
Apr
370,693
346,096
260,625
May
387,599
365,006
260,625
Jun
402,190
380,589
260,625
Jul
393,910
372,252
260,625
Aug
402,029
370,327
260,625
Sep
426,049
412,426
260,625
Oct
415,103
400,903
260,625
Nov
420,162
411,272
260,625
Dec
401,367
396,140
260,625
Average
390,252
373,134
260,625
Month
Dry Sludge (T)
Mafraq Dry Sludge Production - 2007
Ton
nes
/mo
nth
0
1,500
2,500
Jan
1,451
Feb
1,294
Mar
1556
Apr
1519
May
1638
Jun
1975
Jul
1594
Aug
1726
Sep
1882
Oct
1565
Nov
1441
Dec
1716
Average
1613
Month
SS (mg/l)
BOD (mg/l)
NH3 (mg/l)
4.0
2.0
0.0
Jan
2.5
0.7
0.7
Feb
2.8
0.6
0.4
Mar
2.5
0.8
0.2
Apr
2.5
0.7
0.1
May
3.1
1.0
0.1
Jun
2.6
0.7
0.1
Jul
1.9
0.8
0.2
Aug
2.1
0.8
0.9
Sep
2.4
0.8
0.9
Oct
3.5
1.3
0.3
Nov
2.7
0.7
0.3
Dec
2.3
0.8
0.1
Average
2.6
0.8
0.4
2525
Month
Influent (m3/d)
Effluent (m3/d)
Design (m3/d)
Zakher Flow Production - 2007
Flo
ws
(m3
/d)
125,000
75,000
0
Jan
101,010
91,761
54,000
Feb
104,863
91,770
54,000
Mar
105,110
91,418
54,000
Apr
110,248
91,903
54,000
May
106,498
93,611
54,000
Jun
104,483
92,539
54,000
Jul
107,103
94,446
54,000
Aug
107,533
94,776
54,000
Sep
113,416
96,767
54,000
Oct
116,059
96,371
54,000
Nov
115,365
97,765
54,000
Dec
115,876
100,957
54,000
Average
108,964
94,507
54,000
Month
Dry Sludge (T)
Zakher Dry Sludge Production - 2007
Ton
nes
/mo
nth 900
600
300
0
Jan
523
Feb
472
Mar
547
Apr
634
May
634
Jun
634
Jul
625
Aug
470
Sep
491
Oct
517
Nov
499
Dec
518
Average
547
Month
SS (mg/l)
BOD (mg/l)
NH3 (mg/l)
7
8
9
10
11
12
6
4
5
1
2
3
0
Jan
1.5
2.2
9.2
Feb
1.5
2.8
9.4
Mar
3
3.1
6
Apr
5.3
4
10.2
May
1.8
1.6
3.9
Jun
2
2.3
4.1
Jul
2.1
2
5.1
Aug
2.2
2
3
Sep
2.8
1.3
1.2
Oct
3.1
1.6
0.6
Nov
2.6
1.6
0.1
Dec
3.3
1.5
0.6
Average
2.6
2.2
4.5
2626
Sustainability • Capability • Service
Areas
Design Flow (m3/d)
Al
Khazna
Al
Hayer
Al
Aquoa
Al
Shwuaib
Al-
Arrad
Al
Wagan
Al
Faqah
Al
Dhahira
Sieh
Ghareeba
Sieh
Gharaba
Nahil
CitySweihan Remah Bukarriyah
Influent (m3/d)
Effluent (m3/d)
Sludge Production (m3/d)
Remote Area Flow & Sludge Production - 2007
m3
/da
y
2000
0
500
1000
1500
650
719
683
36
1250
1136
1079
57
650
699
664
35
840
703
669
35
840
1085
1031
54
1300
953
906
47
1960
1043
991
52
700
258
246
13
420
327
311
16
42
34
32
2
38
68
65
4
1500
407
387
20
900
268
254
13
90
52
49
3
2727
ADSSC Annual Iftar gathering
2828
Sustainability • Capability • Service
Green water production at both Mafraq and Al
Ain wastewater treatment plants was well within
acceptable chemical / biological parameters, despite
severe hydraulic overloads. Average production was
373,134 cubic meter per day recycled water at Mafraq
and 94,507 cubic meter per day at Al Ain
Average monthly sludge production at Mafraq
wastewater treatment plant was 1,613 cubic meters
and at Al Ain it was 547 cubic meters
Shifted from existing limited-functionality legacy
system to state-of-the-art Geographic Information
System (GIS) for effective asset management
Customer service was accorded highest priority,
with round-the-clock O & M crew availability to resolve
complaints related to odour, blockages and other
unforeseen circumstances
Customer Services Department key positions were
filled with Al Ain Customer Services Section Head and
Abu Dhabi Head of Inspection
Customer, trade effluent and septic tank register
projects were initiated
2929
Major review and consolidation work of ADSSC
stores was carried out in 2007 with the objective
of identifying obsolete items inherited by the
company at the time of inception. Project resulted
in identification and classification of AED 70 million
worth of obsolete items
MAXIMO usage was made mandatory for all
internal purchase orders, contract requisitions and
all procurement activities during the third quarter
of 2007
Ramadan gatherings were organized for ADSSC
employees in Al Ain and Abu Dhabi, hosted by the
Managing Director and the Management Team, in
an effort to enhance internal communication
In-house ADSSC newsletter design, contents,
and team finalized with the objective of launching
in January 2008
2007 MajorAchievements &
Activities
ADSSC monthly newsletter, Elements
3030
Sustainability • Capability • Service
3131
Abu Dhabi Sewerage Services Company PJSC
Future Plans
3232
Sustainability • Capability • Service
Implement the Capital Investment Program, as per the 25-year ADSSC Master
Plan
Execute planned investment projects on-time, within acceptable quality
parameters and budget
Operate existing ageing and over-loaded infrastructure in safe and
environmentally friendly manner
Finalize and issue ADSSC Standard and Specifications
Satisfy the regulatory authorities by meeting and exceeding their requirements
Manage cost in a relatively high inflation environment
ADSSC Management Team meeting
3333
Future
Plans
7,000,000,000
Dir
ha
ms
Cap i t a l I n v e s t m e n t P r o g ra m
5,000,000,000
3,000,000,000
1,000,000,000
2007 2008 2009 2010 2011 2012 2013
0
SIP TIP ND On going Total
Attract and develop a skilled workforce
Continuously review and improve HR policies and procedures in coordination
with ADWEA
Review and improve organizational structure
Meet Emiritization target of 4% increase per year, as stipulated by ADWEA
Prepare for tariff regime
Enhance customer satisfaction monitoring and measurement systems
Develop and initiate a one-stop customer care system
3434
Sustainability • Capability • Service
Develop and implement customer awareness strategy
Continuously seek ways of process improvement and automation
Integration of existing information systems and generation of intelligent
management reports
Optimize supply-chain management
Implement a robust budgeting process
Align the strategic planning and performance management process with the
requirements of Abu Dhabi Executive Council
Implement and continuously improve Business Process & Risk Assestment
frameworks
Engagement with ADSSC service providers
3535
Implement and continuously improve Business Planning & Performance
Management frameworks
Implement IMS project and gain ISO 9001, ISO 14001 and OHSAS 18001
certification
Continuously improve internal communication
Enhance ADSSC external brand and perception
Implement Corporate Social Responsibility (CSR) policies
Design and implement value-added Benchmarking projects
Implement IT strategy in coordination with ADWEA
Implement Business Intelligence (BI) system in coordination with ADWEA
Future
Plans
ADSSC employees are its most important assets
3636
Sustainability • Capability • Service
3737
Abu Dhabi Sewerage Services Company PJSC
Directors’ Report & Financial Statements
31 December 2007
3838
Sustainability • Capability • Service
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDER
OF ABU DHABI SEWERAGE SERVICES COMPANY PJSC
Report on the Financial Statements
We have audited the accompanying financial statements of Abu Dhabi Sewerage
Services Company PJSC (the “Company”), which comprise the balance sheet as
at 31 December 2007 and the income statement, statement of changes in equity
and cash flow statement for the year then ended and a summary of significant
accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
financial statements in accordance with International Financial Reporting Standards
and the applicable provisions of the articles of association of the Company and
the UAE Commercial Companies Law of 1984 (as amended). This responsibility
includes: designing, implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit in accordance with International Standards on
Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
3939
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditors’ judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
4040
Sustainability • Capability • Service
Opinion
In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as at 31 December 2007 and its financial
performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards.
Emphasis of matters:
Going concern
Without qualifying our opinion, we draw attention to note 2 to the financial
statements. The Company has reported a loss of AED 268,807 thousand (2006: AED
580,034 thousand) for the year then ended and, as of that date, its current liabilities
exceeded its current assets by AED 36,593 thousand (2006: AED 39,064 thousand).
Management has prepared the financial statements on a going concern basis as
the shareholder has committed to provide sufficient financial support to enable the
Company to meet its financial obligations for the foreseeable future.
4141
Report on Other Legal and Regulatory Requirements
We also confirm that, in our opinion, the financial statements include, in all material
respects, the applicable requirements of the UAE Commercial Companies Law of
1984 (as amended) and the articles of association of the Company; proper books
of account have been kept by the Company; an inventory was duly carried out
and the contents of the report of the Board of Directors relating to these financial
statements are consistent with the books of account. We have obtained all the
information and explanations which we required for the purpose of our audit and,
to the best of our knowledge and belief, no violations of the UAE Commercial
Companies Law of 1984 (as amended) or of the articles of association of the
Company have occurred during the year which would have had a material effect
on the business of the Company or on its financial position.
31 March 2008
Abu Dhabi
4242
Sustainability • Capability • Service
INCOME STATEMENT
Year ended 31 December 2007
From
inception to
31 December
2007 2006
Notes AED’ 000 AED’ 000
Revenue
Government subsidy 16 380,000 203,168
Direct costs:
Staff costs 4 (103,899) (87,915)
Repairs, maintenance and consumables used 4 (128,284) (168,170)
Depreciation 4&5 (356,077) (504,928)
(588,260) (761,013)
GROSS LOSS (208,260) (557,845)
Other income 4 4,903 99
Administrative expenses 4 (50,007) (13,804)
ADWEA service charges 16 (15,443) (8,484)
LOSS FOR THE YEAR/PERIOD (268,807) (580,034)
4343
BALANCE SHEET
At 31 December 2007
2007 2006
Notes AED’ 000 AED’ 000
ASSETS
Non-current assets
Property, plant and equipment 5 4,437,727 4,518,231
Advances to operating and
maintenance service providers - 7,096
4,437,727 4,525,327
Current assets
Inventories 6 14,813 14,254
Advances to operating and
maintenance service providers 7,086 5,700
Amount due from Government of Abu Dhabi 7 23,350 37,007
Amounts due from related parties 8 199,475 58,210
Prepayments and other receivables 15,634 10,005
Bank balances and cash 2,936 13,651
263,294 138,827
TOTAL ASSETS 4,701,021 4,664,154
EQUITY AND LIABILITIES
Equity
Share capital 9 10,000 10,000
Proposed increase in share capital 10 4,441,400 4,441,630
Government of Abu Dhabi account 11 - 536,711
Abu Dhabi Water and Electricity Authority account 11 676,640 -
Accumulated losses (848,841) (580,034)
4,279,199 4,408,307
Amount due to Abu Dhabi
Water and Electricity Authority 12 81,177 36,375
Total equity 4,360,376 4,444,682
Non-current liabilities
Employees’ end of service benefits 13 25,496 33,327
Retention payable 15,262 8,254
40,758 41,581
Current liabilities
Accounts payable and accruals 14 58,838 38,609
Construction creditors and retention payable 205,220 110,739
Amounts due to related parties 15 35,829 28,543
299,887 177,891
Total liabilities 340,645 219,472
TOTAL EQUITY AND LIABILITIES 4,701,021 4,664,154
4444
Sustainability • Capability • Service
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2007
Proposed
increase in Government of
Share share Abu Dhabi Accumulated
capital capital account losses Total
AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000
Share capital injected 10,000 - - - 10,000
Proposed increase in share capital - 4,441,630 - - 4,441,630
Balance at 1 July 2005 10,000 4,441,630 - - 4,451,630
Loss for the period - - - (580,034) (580,034)
Net movement in
Government of Abu Dhabi account - - 536,711 - 536,711
Balance at 31 December 2006 10,000 4,441,630 536,711 (580,034) 4,408,307
Balance at 1 January 2007 10,000 4,441,630 536,711 (580,034) 4,408,307
Loss for the year - - - (268,807) (268,807)
Store material transferred - (230) - - (230)
Net movement in Government of
Abu Dhabi account - - 139,929 - 139,929
Balance at 31 December 2007 10,000 4,441,400 676,640 (848,841) 4,279,199
4545
CASH FLOW STATEMENT
At 31 December 2007
From
inception to
31 December
2007 2006
Notes AED’ 000 AED’ 000
OPERATING ACTIVITIES
Loss for the year/period (268,807) (580,034)
Adjustments for:
Depreciation 5 356,077 504,928
Provision for employees’ end of service benefits,
net of reversal 2,684 158
89,954 (74,948)
Working capital changes:
Inventories (789) 4,262
Prepayments and other receivables (5,629) (10,005)
Amount due from Government of Abu Dhabi 13,657 36,255
Amount due from related parties (141,265) (58,210)
Amount due to related parties 7,286 28,543
Accounts payable and accruals 121,718 81,275
Advances to O & M Service providers 5,710 (717)
Cash from operations 90,642 6,455
Employees’ end of service benefits paid 13 (10,515) (35,469)
Net cash from (used in) operating activities 80,127 (29,014)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (275,573) (530,421)
Net cash used in investing activities (275,573) (530,421)
FINANCING ACTIVITIES
Amount due to Abu Dhabi Water and
Electricity Authority 44,802 36,375
Government of Abu Dhabi account - 536,711
Abu Dhabi Water and Electricity Authority equity account 139,929 -
Net cash from financing activities 184,731 573,086
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (10,715) 13,651
Cash and cash equivalents at 1 January 13,651 -
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 2,936 13,651
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Significant non-cash transactions, which have been excluded from the cash flow
statement are as follows:
Employees’ end of service benefits transferred
from a related party - 586
Property, plant and equipment - 4,492,738
Advances to operating and maintenance
service providers - 12,079
Inventories 10 230 18,516
Amounts due from Government of Abu Dhabi - 73,262
Share capital - 10,000
Proposed increase in share capital - 4,441,630
Employees’ end of service benefit - 68,638
Accounts payable and accruals - 4,624
Construction creditors and retention payable - 71,703
4747
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2007
1. ACTIVITIES
Abu Dhabi Sewerage Services Company PJSC (ADSSC or the ‘Company’) is a wholly
owned subsidiary of Abu Dhabi Water and Electricity Authority (The Authority or
ADWEA) which was established pursuant to the provisions of Law No. 17 of 2005 as
a Public Joint Stock Company, concerning the regulation of the sewerage services
sector, to have the overall responsibility for the restructuring and privatisation
of the sewerage services activities formerly carried out by Abu Dhabi and Al Ain
Municipalities - Sewage Department, a department of the Government of Abu
Dhabi. The Law became effective in June 2005.
ADWEA is authorised under Law No. 17 to develop a scheme to transfer the assets of
Abu Dhabi and Al Ain Municipalities – Sewage Department to ADSSC or any other
entity established in accordance with the provisions of Law No. 17. Accordingly,
those activities formerly undertaken by Abu Dhabi and Al Ain Municipalities –
Sewage Department and the related assets have been transferred to the Company
as from 30 June 2005 being the inception date of the activities of the Company. The
Company is also governed by its license issued by the Regulation and Supervision
Bureau.
The principal activity of the Company is the assembly, treatment, manufacture
and maintenance of sewage facilities and networks in the Emirates. The Company
also owns all sewage utilities within the Emirate of Abu Dhabi including pipes and
water pumping stations.
The financial statements were authorized for issue in accordance with a resolution
of the Board of Directors on 31 March 2008.
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2. FUNDAMENTAL ACCOUNTING CONCEPT
The Company incurred a loss of AED 268,807 thousand (2006: AED 580,034 thousand)
for the year ended 31 December 2007 and as of that date, the Company’s current
liabilities exceeded its current assets by AED 36,593 thousand (2006: AED 39,064
thousand).
The financial statements have been prepared on a going concern basis as the
shareholder has agreed to provide the Company with sufficient financial support
to enable it to meet its financial obligations for the foreseeable future.
3.1. BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards and applicable requirements of the UAE Federal
Commercial Companies Law of 1984 (as amended).
The financial statements have been presented in UAE Dirhams (“AED”), which is
the functional currency of the company and all values have been rounded to the
nearest thousand (AED “000”) except when otherwise indicated.
The financial statements are prepared under the historical cost convention.
ADSSC Ramadan Iftar gathering
4949
3.2 CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous financial
year except as follows:
The Company has adopted the following new and amended IFRS and IFRIC
interpretations during the year. Adoption of these revised standards and
interpretations did not have any effect on the financial performance or position of
the Company. They did however give rise to additional disclosures, including in
some cases, revisions to accounting policies.
IFRS 7 Financial Instruments: Disclosures
IAS 1 Amendment – Presentation of Financial Statements
The principal effects of these changes are as follows:
IFRS 7 Financial Instruments: Disclosures
This standard requires disclosures that enable users of the financial statements to
evaluate the significance of the Company’s financial instruments and the nature
and extent of risks arising from those financial instruments. The new disclosures
are included throughout the financial statements. While there has been no effect
on the financial position or results, comparative information has been revised
where needed.
IAS 1 Amendment – Presentation of Financial Statements
This amendment requires the Company to make new disclosures to enable users
of the financial statements to evaluate the Company’s objectives, policies and
processes for managing capital. These new disclosures are shown in note 18.
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3.3 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities, and the disclosures of contingent
liabilities, at the reporting date. However, uncertainty about these assumptions
and estimates could result in outcomes that could require a material adjustment to
the carrying amount of the asset or liability affected in the future.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below:
Assets and liabilities transferred from Abu Dhabi and Al Ain Municipalities
As of 30 June 2005, the assets and liabilities of Abu Dhabi and Al Ain Municipality
Sewerage Departments of the Government of Abu Dhabi were transferred to the
Company based on the best available information as obtained from the accounting
records of the Government of Abu Dhabi as of 30 June 2005 being the date of the
transfer.
5151
Subsidy
In the absence of an agreed process for the Company to claim the difference
between its Maximum Allowed Revenue (MAR) and the regulated revenues as
determined in its Price Control Return (as communicated by the Regulation and
Supervision Bureau), from the users of its facilities and the Government of Abu
Dhabi, The Company determined its revenue from subsidy based on those rights
and rewards that are confirmed during the period.
Impairment of inventories
Inventories are held at the lower of cost and net realisable value. When inventories
become old or obsolete, an estimate is made of their net realisable value. For
individually significant amounts this estimation is performed on an individual basis.
Amounts which are not individually significant, but which are old or obsolete, are
assessed collectively and a provision applied according to the inventory type and
the Company’s policy for inventory provisioning. The gross inventories were AED
83,905 thousand (2006: AED 84,349 thousand) with provisions for old and obsolete
inventories of AED 69,092 thousand (2006: AED 70,095 thousand).
Useful lives of property, plant and equipment
The Company determines the estimated useful lives of its property, plant and
equipment for calculating depreciation. This estimate is determined after
considering the expected usage of the asset or physical wear and tear. Management
reviews the residual value and useful lives annually and the future depreciation
charge would be adjusted where management believes that the useful lives differ
from previous estimates.
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3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Government subsidy
Subsidy in respect of the operations of ADSSC is based on communication between
the Authority on behalf of the Company and the Government of Abu Dhabi. There
are accounted for when the rights to the subsidy are established.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and
any impairment losses. Such cost includes the cost of replacing part of the plant
and equipment when that cost is incurred, if the recognition criteria are met.
Depreciation is provided on all property, plant and equipment, other than capital
work in progress and is calculated on a straight line basis over the estimated useful
life of the asset as follows:
5353
Buildings 25 years
Plant and equipment 5 - 25 years
Motor vehicles 4 years
The carrying amounts of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate the carrying value
may not be recoverable. If any such indication exists and where the carrying values
exceed the estimated recoverable amount, the assets are written down to their
recoverable amount, being the higher of their fair value less costs to sell and their
value in use.
Expenditure incurred to replace a component of an item of property, plant and
equipment that is accounted for separately is capitalised and the carrying amount
of the component that is replaced is written off. Other subsequent expenditure is
capitalised only when it increases future economic benefits of the related item of
property, plant and equipment. All other expenditure is recognised in the income
statement as the expense is incurred.
Capital work in progress
Capital work in progress is included in property, plant and equipment at cost on
the basis of the percentage completed at the balance sheet date. The capital
work in progress is transferred to the appropriate asset category and depreciated
in accordance with the Company’s policies when construction of the asset
is completed and the asset is in a location and condition as intended by the
management.
Impairment and uncollectability of financial assets
An assessment is made at each balance sheet date to determine whether there is
objective evidence that a specific financial asset may be impaired. If such evidence
exists, any impairment loss is recognised in the income statement. Impairment is
determined as the difference between cost and the present value of future cash
flows discounted at the current market rate of return for a similar financial asset.
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Inventories
Inventories are stated at the lower of cost, determined on the basis of weighted
average costs and net realisable value. Costs are those expenses incurred in
bringing each item to its present location and condition.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred on completion and disposal.
Receivable
Receivable are stated at original invoice amount less a provision for any uncollectible
amounts. An estimate for doubtful debts is made when collection of the full amount
is no longer probable. Bad debts are written off when there is no possibility of
recovery.
Accounts payable and accruals
Liabilities are recognised for amounts to be paid in the future for goods or services
received, whether or not billed by the supplier or not.
5555
Provisions
Provisions are recognised when the Company has an obligation (legal or
constructive) arising from a past event, and the costs to settle the obligation are
both probable and able to be reliably measured.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents consist of
cash in hand and bank balances.
Employees’ end of service benefits
The Company provides end of service benefits to its expatriate employees. The
entitlement to these benefits is based upon the employees’ final salary and length
of service, subject to the completion of a minimum service period. The expected
costs of these benefits are accrued over the period of employment.
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With respect to its UAE national employees, the Company makes contribution to
Abu Dhabi Retirement Pensions and Benefits fund calculated as a percentage of the
employees’ salaries. The Company’s obligations are limited to these contributions,
which are expensed when due.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the
transactions. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date. All differences
are taken to the income statement.
Financial instruments
Financial instruments comprise of financial assets and liabilities.
Financial assets consist of bank balances and cash, due from related parties and
receivables. Financial liabilities consist of term loan from ADWEA, accounts payable,
accruals and due to related parties.
Fair values
Fair values of financial instruments are based on estimated fair values using methods
such as net present values of future cash flows or by reference to the market value
of similar instruments.
5757
3.5 FUTURE CHANGES IN ACCOUNTING POLICIES – STANDARDS
ISSUED BUT NOT YET EFFECTIVE
1. Presentation of Financial Statements
The Company has not adopted the revised IAS 1 (Presentation of Financial
Statements) which will be effective for the year ending 31 December 2009. The
application of this Standard will result in amendments to the presentation of the
financial statements.
2. Borrowing Costs
A revised IAS 23 Borrowing costs was issued in March 2007, and becomes effective
for financial years beginning on or after 1 January 2009. The standard has been
revised to require capitalisation of borrowing costs when such costs relate to a
qualifying asset. A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale. The Company does not incur
any borrowing costs on its projects being constructed and hence this revision will
have no impact on the Company.
3. Consolidated and Separate Financial Statements
IAS 27 revised is effective for annual periods beginning on or after 1 July 2009, with
earlier application only permitted when the revised IRS 3 is applied. The revised
standard applies retrospectively with some exceptions. IAS 27 revised no longer
restricts the allocation to minority interest of losses incurred by a subsidiary to
the amount of the non-controlling equity investment in the subsidiary. A partial
disposal of equity interest in a subsidiary that does not result in a loss of control
will be accounted for as an equity transaction and will have no impact on goodwill
nor will it give rise to any gain or loss. Where there is loss of control of a subsidiary,
any retained interest will have to be remeasured to fair value, which will impact the
gain or loss recognised on disposal. The Company does not own any subsidiaries
and hence this revision will have no impact on the Company.
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Sustainability • Capability • Service
4. LOSS FOR THE YEAR
The loss for the year/period is stated after charging:
Year ended From inception31 December to 31 December
2007 2006AED ‘000 AED’ 000
Staff costs:
Salaries 91,757 85,563
Employees’ end of service benefits, net 5,655 158
Other benefits 6,487 2,194
103,899 87,915
Depreciation 356,077 504,928
Administrative expenses:
Vehicle running cost 4,724 2,709
Insurance expenses 4,966 3,391
License fee 4,878 1,971
Consultancy charges 12,792 1,232
IT related costs 296 2,089
Other expenses 22,351 2,412
50,007 13,804
Repairs, maintenance and consumables used:
Mechanical projects 49,498 107,778
Electrical projects 4,431 10,119
Civil maintenance 13,986 -
Operation and maintenance 19,400 4,314
Tools and equipments maintenance 438 4,261
Utilities 26,110 38,261
Others 14,421 3,437
128,284 168,170
Other income:
Miscellaneous 4,903 99
5959
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
2007 2006
AED’ 000 AED’ 000
Property, plant and equipment at net book value 4,386,221 4,466,781
Advances to contractors 51,506 51,450
4,437,727 4,518,231
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5. PROPERTY, PLANT AND EQUIPMENT continued
Capital
Plant and Motor work in
Buildings equipment vehicles progress Total
AED’000 AED’000 AED’000 AED’000 AED’000
2007
Cost:
At 1 January 2007 167,462 8,233,843 168,701 641,571 9,211,577
Transfers - 537,027 - (537,027) -
Additions - 629 - 274,888 275,517
At 31 December 2007 167,462 8,771,499 168,701 379,432 9,487,094
Depreciation:
At 1 January 2007 128,309 4,449,899 166,588 - 4,744,796
Charge for the period 4,607 350,158 1,312 - 356,077
At 31 December 2007 132,916 4,800,057 167,900 - 5,100,873
Net carrying amount:
At 31 December 2007 34,546 3,971,442 801 379,432 4,386,221
2006
Cost:
At 1 July 2005 as transferred from the
Government of Abu Dhabi (note 9) 167,462 7,925,319 168,701 408,864 8,670,346
Transfers - 293,210 - (293,210) -
Additions - 15,314 - 525,917 541,231
At 31 December 2006 167,462 8,233,843 168,701 641,571 9,211,577
Depreciation:
At 1 July 2005 as transferred from the
Government of Abu Dhabi (note 9) 121,400 3,957,062 161,406 - 4,239,868
Charge for the period 6,909 492,837 5,182 - 504,928
At 31 December 2006 128,309 4,449,899 166,588 - 4,744,796
Net carrying amount:
At 31 December 2006 39,153 3,783,944 2,113 641,571 4,466,781
6161
7. AMOUNT DUE FROM GOVERNMENT OF ABU DHABI
2007 2006
AED’ 000 AED’ 000
Government of Abu Dhabi undertaking –
Employees’ end of service benefits and annual leave benefits 23,350 37,007
8. AMOUNTS DUE FROM RELATED PARTIES
2007 2006
AED’ 000 AED’ 000
Abu Dhabi Transmission and Despatch Company 394 36
Abu Dhabi Water and Electricity Authority 199,081 58,174
199,475 58,210
Amounts due from related parties are neither past due nor impaired (2006: same)
9. SHARE CAPITALAuthorised,
issued and
fully paid
31 December
2007 & 2006
AED’ 000
Ordinary shares of AED 10 each 10,000
The Government of Abu Dhabi has undertaken to meet the cost of all employees’ end of service benefits and an-
nual leave benefit entitlements accruing to employees up to 30 June 2005. All benefits accruing to employees after
this date will be met by the Company.
6. INVENTORIES
2007 2006
AED’ 000 AED’ 000
Spare parts and consumables 83,905 84,349
Less: provision for slow moving and obsolete inventories (69,092) (70,095)
14,813 14,254
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10. PROPOSED INCREASE IN SHARE CAPITAL
2007 2006
AED’ 000 AED’ 000
Total funding for projects approved by WED 4,441,400 4,441,630
Movement
At 1 January 4,441,630 -
Net asset value transferred - 4,441,630
Adjustment (230) -
At 31 December 4,441,400 4,441,630
11. ABU DHABI WATER AND ELECTRICITY AUTHORITY ACCOUNT
2007 2006
AED’ 000 AED’ 000
Balance at 31 December 676,640 -
Movement
At 1 January – transferred from the Government of Abu Dhabi account 536,711 -
Project costs for the year 139,929 -
At 31 December 676,640 -
The proposed increase in share capital will be transferred to share capital on the completion of all legal formalities
which are under progress.
The share capital and proposed increase in share capital represent the value of net assets transferred from Abu
Dhabi and Al Ain Municipalities to the Company as of 30 June 2005.
In accordance with arrangements agreed between the Finance Department of the Government of Abu Dhabi (Gov-
ernment) and the Authority on behalf of the Company, the Government has committed to fund all ongoing proj-
ects approved by the Abu Dhabi and Al Ain Municipalities or committed prior to 1 July 2005 against increasing the
Government’s shareholding in the equity of the Authority. Accordingly, the Authority has resolved to increase its
share in the equity of the Company by the amount of the funding made for projects approved and committed prior
to 1 July 2005.
In view of the above, the Government account as of 1 January 2007 has been transferred to the Authority account.
6363
12. AMOUNT DUE TO ABU DHABI WATER AND ELECTRICITY AUTHORITY
2007 2006
AED’ 000 AED’ 000
Abu Dhabi Water and Electricity Authority 81,177 36,375
13. EMPLOYEES’ END OF SERVICE BENEFITS
The Company provides for employees’ end of service benefits in accordance with the employees’ contracts of
employment.
The movements on the provision for employees’ end of service benefits are as follows:
2007 2006
AED’ 000 AED’ 000
Balance at 1 January 33,327 -
Provision transferred at the beginning of the period - 68,638
Provided during the year/period 5,303 158
Transfer from related parties 523 586
Amounts paid during the year/period (10,515) (36,055)
Excess provision reversed during the year (3,142) -
Balance at 31 December 25,496 33,327
This represents amounts paid by the Authority to fund the Company’s Projects committed after 1 July 2005. The
funding will be converted into an interest free and unsecured loan. No terms of repayment have been specified for
the funding and it is subject to the terms of repayment as resolved by the Board of Directors of the Company and
agreed by the Authority.
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14. ACCOUNTS PAYABLE AND ACCRUALS 2007 2006
AED’ 000 AED’ 000
Trade accounts payable 9,112 7,372Accrued expenses 49,726 31,237
58,838 38,609
15. AMOUNTS DUE TO RELATED PARTIES2007 2006
AED’ 000 AED’ 000
Bainounah Power Company 39 43Abu Dhabi Distribution Company - ADDC 22,915 24,209Al Ain Distribution Company - AADC 12,875 4,291
35,829 28,543
16. RELATED PARTY TRANSACTIONS
These represent transactions with related parties, i.e., other subsidiaries of Abu Dhabi Power Corporation and Abu
Dhabi Water and Electricity Authority, the Government of Abu Dhabi, and directors and key management personnel
of the Company and entities controlled by jointly or significantly influenced by such parties. Pricing policies and
terms of transactions are approved by ADWEA, the Company’s ultimate holding Company.
6565
Transactions included in the income statement are as follows:
2007 2006Cost of Cost of
Sales and sales and Sales and sales andother other other other
income expenses income expensesAED’ 000 AED’ 000 AED’ 000 AED’ 000
Parent Government subsidy 380,000 - 203,168 -
Other related parties
Cost of sales and administrative and other expenses Hire of vehicles from Al Wathba Company for Central Services - 1,339 - 167 Administration service charge from ADWEA - 15,443 - 8,484 Purchase of water and electricity from ADDC - 19,062 - 28,044 Purchase of water and electricity from AADC - 7,048 - 10,104 Connections fees - ADDC - - - 113
Compensation of key management personnelThe remuneration of directors and other members of key management during the year was as follows:
2007 2006AED ‘000 AED’ 000
Short-term benefits 4,113 3,518Employees’ end of service benefits 214 101
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Sustainability • Capability • Service
Others
The activities of the Company are carried out from premises and equipment
constructed on land leased from the Government of Abu Dhabi at no cost.
Amounts due from and to related parties are disclosed in notes 7, 8, 12 and 15.
17. CAPITAL COMMITMENTS
The estimated capital expenditure contracted for at the balance sheet date but
not provided for amounted to AED 1,859,157 thousand (2006: AED 382,845
thousand).
18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Risk is inherent in the Company’s activities and is managed through a process of
ongoing identification, measurement and monitoring, subject to risk limits and
other controls. This process of risk management is critical to the Company’s con-
tinuing profitability and each individual within the Company is accountable for the
risk exposures relating to his or her responsibilities.
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Interest rate risk
The Company is not currently exposed to interest rate risk, as the majority of its
monetary assets and liabilities are not subject to interest rates exposures.
Foreign currency risk
Management considers that the Company is not exposed to significant currency
risk. The majority of its transactions and balances are in either UAE Dirhams or US
Dollars. As the UAE Dirham is pegged to the US Dollar, balances in US Dollars are
not considered to represent significant currency risk.
Liquidity risk
The Company limits its liquidity risk by monitoring its current financial position in
conjunction with its cash flow forecasts and close communication with its parent
(ADWEA) on a regular basis to ensure funds are available to meet its commitments
for liabilities as they fall due.
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The table below summarises the maturity profile of the Company’s financial liabilities at 31 December 2007 based on
contractual undiscounted payments.
Less than 3 3 to 12 1 to 5months months years Total
AED’000 AED’000 AED’000 AED’000
Year ended 31 December 2007Construction creditors and retention payable 205,220 - 15,262 220,482Accounts payable - 9,112 - 9,112
205,220 9,112 15,262 229,594
Period ended 31 December 2006Construction creditors and retentions payable 110,739 - 8,254 118,993Accounts payable - 7,372 - 7,372
110,739 7,372 8,254 126,365
Capital management
The primary objective of the Company’s capital management is to ensure that it maintains a healthy
capital ratio in order to support its business and maximize the shareholder’s value.
The Company manages its capital structure and makes adjustments to it in light of changes in eco-
nomic conditions and close discussions and coordination of its objectives and strategy with its parent.
To maintain or adjust the capital structure, the Company may adjust the return on capital or equity to
its shareholder or increase its share capital. No changes were made in the objectives, policies or pro-
cesses during the year ended 31 December 2007 and period ended 31 December 2006.
Capital comprises of share capital, proposed increase in share capital, amounts due to the Parent and
accumulated losses and is measured at AED 4,360,376 thousand (2006: AED 4,444,682 thousand).
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19. FAIR VALUE
The fair value of the Company’s financial assets and liabilities approximates their
carrying amounts at the balance sheet date.
20. MAXIMUM ALLOWED REVENUE
In accordance with its provisional Price Control Return as communicated to the
Company by the Regulation and Supervision Bureau, the maximum allowed rev-
enue (MAR) for the period ended 31 December 2006 and the year ended 31 De-
cember 2007 amounted to AED 1,981 million and AED 1,617 million respectively.
In the absence of an agreed process to claim the difference between the MAR and
its regulated revenues from the users of its facilities or the Government through
additional subsidies, such amounts have not been recognized in these financial
statements.
21. COMPARATIVE FIGURES
The amounts due from related parties previously shown net of the amounts due
to related parties have been grossed up to show them separately within current
assets and current liabilities. Further, the amount due to Abu Dhabi Water and Elec-
tricity Authority previously included within current liabilities has been reclassified
to within equity due to its nature as explained in note 12. Accordingly, this has
increased the total equity of the Company by AED 37,375 thousand as compared
to the amount shown in the 2006 financial statements.
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Sustainability • Capability • Service
71
Abu Dhabi Sewerage Services Company PJSC
Accounting Statements
31 December 2007
72
Sustainability • Capability • Service
INDEPENDENT AUDITORS’ REPORT FOR SUBMISSION TO
THE REGULATION AND SUPERVISION BUREAU
On the accounting statements of Abu Dhabi Sewerage Services
Company PJSC - Sewerage, Wastewater Treatment and Disposal
Businesses
We have audited the accompanying accounting statements of Abu Dhabi Sewerage
Services Company PJSC (the “Company”), - Sewerage, Wastewater treatment and
disposal (“the Businesses as defined in note 1”) which comprise of the balance sheet
as at 31 December 2007, and the income statement, statement of changes in equity
and cash flow statement for the year then ended, and a summary of significant
accounting policies and other explanatory notes.
Management’s Responsibility for the Accounting statements
Management is responsible for the preparation and fair presentation of these
accounting statements in accordance with Article 3 of condition 8 of the Company’s
Sewerage, Wastewater Treatment and Disposal Licence “the Licence”. This
responsibility includes: designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of accounting statements that
are free from material misstatement, whether due to fraud or error; selecting and
applying appropriate accounting policies; and making accounting estimates that
are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these accounting statements based
on our audit. We conducted our audit in accordance with International Standards
on Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance whether the accounting
statements are free from material misstatement.
73
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the accounting statements. The procedures selected
depend on the auditors’ judgement, including the assessment of the risks of
material misstatement of the accounting statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the accounting statements in order
to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the accounting statements.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
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Opinion
In our opinion, the accounting statements present fairly, in all material respects,
the assets, liabilities, reserves and provisions of, or reasonably attributable to the
Businesses of the Company as of 31 December 2007 and of the revenues, cost and
cash flows of, or reasonably attributable to the Businesses for the year then ended
in accordance with Article 3 of condition 8 of the Company’s Licence. Further,
the accounting statements are in agreement with the accounting records of the
Company which have been maintained in accordance with condition 8 of the
Licence.
75
Emphasis of matters:
Going concern
Without qualifying our opinion, we draw attention to note 2 to the accounting
statements. The Company has reported a loss of AED 268,807 thousand (2006: AED
580,034 thousand) for the year then ended and, as of that date, its current liabilities
exceeded its current assets by AED 36,593 thousand (2006: AED 39,064 thousand).
Management has prepared the accounting statements on a going concern basis as
the shareholder has committed to provide sufficient financial support to enable the
Company to meet its financial obligations for the foreseeable future.
22 June 2008
Abu Dhabi
76
Sustainability • Capability • Service
INCOME STATEMENT
Year ended 31 December 2007
Sewerage
2007 2006 2007
Notes AED ‘000 AED ‘000
Revenue
Government subsidy 16 254,413 157,484
Direct costs:
Staff costs 4 (69,934) (61,904)
Repairs, maintenance and consumables used (90,408) (138,117)
Depreciation 4 (292,390) (409,135)
(452,732) (609,156)
GROSS (LOSS) PROFIT (198,319) (451,672)
Other income 4,883 99
Administrative expenses 4 (28,515) (9,181)
ADWEA service charges 16 (10,627) (5,741)
(LOSS) PROFIT FOR THE YEAR/PERIOD (232,578) (466,495)
77
Total
From
Year ended
Wastewater treatment Disposal 31 December
2006 2007 2006 2007 2006
AED ‘000 AED ‘000 AED ‘000 AED ‘000 AED ‘000 AED‘000
103,054 41,078 22,533 4,606 380,000 203,168
(25,143) (22,275) (8,822) (3,736) (103,899) (87,915)
(32,508) (28,028) (5,368) (2,025) (128,284) (168,170)
(61,179) (92,204) (2,508) (3,589) (356,077) (504,928)
(118,830) (142,507) (16,698) (9,350) (588,260) (761,013)
(15,776) (101,429) 5,835 (4,744) (208,260) (557,845)
16 - 4 - 4,903 99
(18,935) (4,264) (2,557) (359) (50,007) (13,804)
(4,086) (2,265) (730) (478) (15,443) (8,484)
(38,781) (107,958) 2,552 (5,581) (268,807) (580,034)
inception to
31 December
78
Sustainability • Capability • Service
BALANCE SHEET
At 31 December 2007
Sewerage 2007 2006
Notes AED ‘000 AED ‘000
ASSETSNon-current assetsProperty, plant and equipment 5 3,665,718 3,779,355Advances to operating and maintenance service providers - 5,958
3,665,718 3,785,313
Current assetsInventories 6 10,549 11,805Advances to operating and maintenance service providers 2,688 4,786Amounts due from Government of Abu Dhabi 7 15,514 25,040Amounts due from related parties 8 133,550 45,121Prepayments and other receivables 10,583 7,527Bank balances and cash 1,966 10,581
174,850 104,860
TOTAL ASSETS 3,840,568 3,890,173
EQUITY AND LIABILITIESEquityShare capital 9 8,194 8,194Proposed increase in share capital 10 3,647,633 3,677,819Government of Abu Dhabi account 11 - 456,035Abu Dhabi Water and Electricity Authority account 11 572,977 -Accumulated losses (699,073) (466,495)
3,529,731 3,675,553Amount due to Abu Dhabi Water and Electricity Authority 12 73,281 36,375
Total equity 3,603,012 3,711,928
Non-current liabilitiesEmployees’ end of service benefits 13 17,158 22,551Retention payable 13,557 7,777
30,715 30,328
Current liabilitiesAccounts payable and accruals 14 39,728 29,928Construction creditors and retention payable 141,599 94,163Amounts due to related parties 15 25,514 23,826
206,841 147,917
Total liabilities 237,556 178,245
TOTAL EQUITY AND LIABILITIES 3,840,568 3,890,173
79
Wastewater treatment Disposal Total2007 2006 2007 2006 2007 2006
AED ‘000 AED ‘000 AED ‘000 AED ‘000 AED ‘000 AED‘000
740,960 718,537 31,049 20,339 4,437,727 4,518,231 - 1,052 - 86 - 7,096
740,960 719,589 31,049 20,425 4,437,727 4,525,327
3,592 2,277 672 172 14,813 14,2544,183 845 215 69 7,086 5,7006,579 9,882 1,257 2,085 23,350 37,007
54,097 11,770 11,828 1,319 199,475 58,2104,213 2,139 838 339 15,634 10,005
796 2,760 174 310 2,936 13,651
73,460 29,673 14,984 4,294 263,294 138,827
814,420 749,262 46,033 24,719 4,701,021 4,664,154
1,743 1,743 63 63 10,000 10,000768,732 744,312 25,035 19,499 4,441,400 4,441,630
- 73,235 - 7,441 - 536,71193,748 - 9,915 - 676,640 -
(146,739) (107,958) (3,029) (5,581) (848,841) (580,034)
717,484 711,332 31,984 21,422 4,279,199 4,408,307 6,795 - 1,101 - 81,177 36,375
724,279 711,332 33,085 21,422 4,360,376 4,444,682
6,401 8,898 1,937 1,878 25,496 33,3271,602 477 103 - 15,262 8,254
8,003 9,375 2,040 1,878 40,758 41,581
15,741 7,806 3,369 875 58,838 38,60957,709 16,383 5,912 193 205,220 110,739
8,688 4,366 1,627 351 35,829 28,543
82,138 28,555 10,908 1,419 299,887 177,891
90,141 37,930 12,948 3,297 340,645 219,472
814,420 749,262 46,033 24,719 4,701,021 4,664,154
80
Sustainability • Capability • Service
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2007
Wastewater
Sewerage treatment
AED ‘000 AED ‘000
Share capital
Balance at 31 December 2006 and 2007 8,194 1,743
Proposed increase in share capital
Balance at 1 July 2005 and 31 December 2006 3,677,819 744,312
Movement between businesses (29,997) 24,458
Store material transferred (189) (38)
Balance at 31 December 2007 3,647,633 768,732
Government of Abu Dhabi account
At 1 July 2005 - -
Net movement in Government of Abu Dhabi account 456,035 73,235
Balance at 31 December 2006 456,035 73,235
Net movement in Government of Abu Dhabi account 116,942 20,513
Balance at 31 December 2007 572,977 93,748
Accumulated losses
Loss for the period and
balance at 31 December 2006 (466,495) (107,958)
(Loss) profit for the year (232,578) (38,781)
Balance at 31 December 2007 (699,073) (146,739)
81
Disposal Total
AED ‘000 AED ‘000
63 10,000
19,499 4,441,630
5,539 -
(3) (230)
25,035 4,441,400
- -
7,441 536,711
7,441 536,711
2,474 139,929
9,915 676,640
(5,581) (580,034)
2,552 (268,807)
(3,029) (848,841)
82
Sustainability • Capability • Service
CASH FLOW STATEMENT
Year ended 31 December 2007
Sewerage 2007 2006
Notes AED ‘000 AED ‘000
OPERATING ACTIVITIES(Loss) profit for the year/period (232,578) (466,495)Adjustments for: Depreciation 6 292,390 409,135 Provision for employees’ end of service benefits 1,723 107
61,535 (57,253)Working capital changes: Inventories 1,067 3,245 Prepayments and other receivables (3,056) (7,004) Amounts due from Government of Abu Dhabi 9,526 81,847 Amounts due from related parties (88,429) (45,121) Amounts due to related parties 1,688 23,826 Accounts payable and accruals 63,016 53,173 Advances to operating and maintenance service providers 8,056 (601) Movement between businesses (29,997) 40,203
Cash from (used in) operations 23,406 92,315Employees’ end of service benefits paid 13 (7,115) (24,397)
Net cash from (used in) operating activities 16,291 67,918
INVESTING ACTIVITIESPurchase of property, plant and equipment (178,754) (534,414)
Net cash used in investing activities (178,754) (534,414)
FINANCING ACTIVITIESAmount due to Abu Dhabi Water and Electricity Authority 36,906 36,375Government of Abu Dhabi account - - 440,702Abu Dhabi Water and Electricity Authority equity account 116,942 -
Net cash from financing activities 153,848 477,077
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,615) 10,581Cash and cash equivalent at 1 January 10,581 -
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 1,966 10,581
83
Total From
Year ended inception to Wastewater treatment Disposal 31 December 31 December
2007 2006 2007 2006 2007 2006AED ‘000 AED ‘000 AED ‘000 AED ‘000 AED ‘000 AED‘000
(38,781) (107,958) 2,552 (5,581) (268,807) (580,034)
61,179 92,204 2,508 3,589 356,077 504,928310 42 651 9 2,684 158
22,708 (15,712) 5,711 (1,983) 89,954 (74,948)
(1,353) 1,017 (503) - (789) 4,262(2,074) (2,601) (499) (400) (5,629) (10,005)
3,303 (48,385) 828 2,793 13,657 36,255(42,327) (11,770) (10,509) (1,319) (141,265) (58,210)
4,322 4,366 1,276 351 7,286 28,54350,386 27,335 8,316 767 121,718 81,275(2,286) (107) (60) (9) 5,710 (717)24,458 34,828 5,539 (5,375) - -
57,137 (80,685) 10,099 5,175 90,642 6,455(2,807) (9,627) (593) (1,445) (10,515) (35,469)
54,330 (90,312) 9,506 (6,620) 80,127 (29,014)
(83,603) (2,660) (13,217) 6,653 (275,574) (530,421)
(83,603) (2,660) (13,217) - (275,574) (530,421)
6,795 - 1,101 - 44,802 36,375- 95,732 - 277 - 536,711
20,514 - 2,474 - 139,930 -
27,309 95,732 3,575 277 184,732 573,086
(1,964) 2,760 (136) 310 (10,715) 13,6512,760 - 310 - 13,651 -
796 2,760 174 310 2,936 13,651
84
Sustainability • Capability • Service
Significant non-cash transactions, which have been excluded from the cash flow
statement are as follows:
Employees’ end of service benefits transferred
from a related party - 586
Property, plant and equipment - 4,492,738
Advances to operating and maintenance
service providers - 12,079
Inventories 10 230 18,516
Amounts due from Government of Abu Dhabi - 73,262
Share capital - 10,000
Proposed increase in share capital - 4,441,630
Employees’ end of service benefit - 68,638
Accounts payable and accruals - 4,624
Construction creditors and retention payable - 71,703
85
NOTES TO THE ACCOUNTING STATEMENTS
31 December 2007
1. ACTIVITIES
Abu Dhabi Sewerage Services Company PJSC (the “Company” and the “Licensee”)
which is a wholly owned subsidiary of Abu Dhabi Water and Electricity Authority
(the Authority or ADWEA) was established pursuant to the provisions of Law No.
17 of 2005 as a Public Joint Stock Company, concerning the regulation of the
sewerage services sector, to have the overall responsibility for the restructuring and
privatisation of the sewerage services activities formerly carried out by Abu Dhabi
and Al Ain Municipalities - Sewage Department, a department of the Government
of Abu Dhabi. The Law became effective in June 2005.
ADWEA is authorised under Law No. 17 to develop a scheme to transfer the assets
of Abu Dhabi and Al Ain Municipalities – Sewage Department to the Company
or any other entity established in accordance with the provisions of Law No.17.
Accordingly, those activities formerly undertaken by Abu Dhabi and Al Ain
Municipalities – Sewage Department and the related assets have been transferred
to the Company as from 30 June 2005.
86
Sustainability • Capability • Service
The principal activity of the Company is
the assembly, treatment, manufacture
and maintenance of sewerage facilities
and networks in the Emirate of Abu
Dhabi. The Company also owns all
sewerage utilities within the Emirate of
Abu Dhabi including pipes and water
pumping stations.
The Company is also governed by
its Sewerage, Wastewater Treatment
and Disposal Licence (“the Licence”)
issued to the Company by Regulation &
Supervision Bureau (“the Bureau”).
The activities permitted to be carried out
by the Licensee pursuant to the Licence
in respect of the authorized areas are:
Sewerage; Wastewater Treatment; and
Disposal.
These accounting statements, which
represent the Sewerage, Wastewater
Treatment and Disposal businesses of
the Company for the year ended 31
December 2007 were approved by
senior management issue on 22 June
2008.
87
2. FUNDAMENTAL ACCOUNTING
CONCEPT
The Company incurred a loss of AED
268,807 thousand (2006: AED 580,034
thousand) for the year ended 31
December 2007 and as of that date, the
Company’s current liabilities exceeded its
current assets by AED 36,593 thousand
(2006: AED 39,064 thousand).
The accounting statements have been
prepared on a going concern basis as
the shareholder has agreed to provide
the Company with sufficient financial
support to enable it to meet its financial
obligations for the foreseeable future.
88
Sustainability • Capability • Service
3.1. BASIS OF PREPARATION
As required by the Company’s Licence, the Company operates three separate
licenced businesses as follows:
Sewerage; Wastewater treatment; and Disposal.
The Company is required to prepare separate accounting statements for each of
its businesses. In preparing the statements, categories of revenues, costs, assets,
liabilities, provisions and reserves have been charged or allocated specifically to a
business to which they relate wherever appropriate. However, due to the integrated
nature of the Company’s activities, it is necessary to allocate certain elements of
these categories to determine those amounts reasonable attributable to each of
the business as an individual activity and a stand alone operation.
89
The basis of allocation are as follows:
Allocation of assets and liabilities
Account heading Basis of allocation
Property, plant and equipment
Advances to operating and
maintenance service providers
Inventories
Amounts due from related
parties Abu Dhabi Water and
Electricity Authority
Amounts due from related
parties Government of
Abu Dhabi undertaking
– Employees end of service
benefits and annual
leave benefits
Bank balances and cash
Property, plant and equipment items (including capital work in progress and
advances paid to contractors) directly attributable to a business were identified
from the Company’s fixed asset register based on the nature of the assets and are
allocated to the appropriate business. Items of property, plant and equipment of
a common nature to all businesses are allocated based on applicable ratios.
Operation and maintenance contracts are allocated to the three businesses
based on the contracts scope as advised by Operation and Maintenance.
Inventories are allocated to the appropriate business using the direct operation
and maintenance expenditure for the year.
Amounts directly attributable to a business are identified and allocated to the
appropriate business.
Amounts relating to employees directly attributable to a business are identified
and allocated to the appropriate business. Amounts relating to employees
who are not directly attributable to one business i.e. projects, finance, human
resources, customer service, operation and maintenance, assets, supply and
Managing Director’s office (secondary cost centres) are allocated to the three
businesses using a staff costs ratio.
Amounts are allocated based on direct expenditures excluding depreciation and
provisions.
90
Sustainability • Capability • Service
Account heading Basis of allocation
Share capital
Proposed increase in
share capital
Government of Abu Dhabi
account
Employees’ end of
service benefits
Advance from Abu Dhabi
Water and Electricity Authority
Accounts payable and accruals
Construction creditors and
retentions
Allocation of the income statement
Revenue (Government Subsidy)
Staff costs
Repairs, maintenance and
consumables used
Based on the total asset value for appropriate business assets and liabilities
transferred from Abu Dhabi and Al Ain Municipalities to the Company as of 1
July 2005.
Based on the net asset value for appropriate business assets and liabilities
transferred from Abu Dhabi and Al Ain Municipalities to the Company as of 1 July
2005 and amended annually to account for transfers between the businesses.
Amounts directly attributable to a business are identified and allocated to the
appropriate business.
Amounts relating to employees directly attributable to a business are identified
and allocated to the appropriate business. Amounts relating to employees
who are not directly attributable to one business i.e. projects, finance, human
resources, customer service, operation and maintenance, assets, supply and
Managing Director’s office (secondary cost centres) are allocated to the three
businesses using a staff costs ratio.
Amounts are allocated based on direct expenditures excluding depreciation and
provisions.
Amounts are allocated based on direct expenditures excluding depreciation and
provisions.
Amounts directly attributable to a business are identified and allocated to
the appropriate business. Unspecified items or items of a common nature are
allocated to the three businesses using the appropriate secondary cost centers
basis of allocation disclosed below.
Amounts are allocated based on direct expenditures excluding depreciation and
provisions.
Amounts relating to employees directly attributable to a business are identified
and allocated to the appropriate businesses. Amounts relating to employees
engaged in common activities are allocated to the three businesses using the
appropriate secondary cost centres basis of allocation disclosed below.
Amounts directly attributable to a business are identified and allocated to the
appropriate businesses. Items of common nature expenses are allocated using
operation and maintenance department costs ratio.
91
Account heading Basis of allocation
Depreciation The same basis as applied for property, plant and equipment.
ADWEA service charges This is allocated using the appropriate secondary cost centers basis of
allocation as disclosed below.
Staff costs, repairs, maintenance and consumables used and administrative expenses (‘the Costs’) are initially
allocated to the following divisions and subsequently to the appropriate businesses on the basis detailed below (“the
Secondary Basis”):
Divisions Basis of allocation
Assets division Based on the cost of fixed assets excluding cost for work in progress.
Customer services division Based on staff headcount ratio.
Operation and Maintenance division Based on the Operation and Maintenance direct costs ratio.
Projects division Based on the addition in the capital work in progress.
Managing Director Office Based on staff headcount ratio.
Supply division Based on staff headcount ratio.
Human resource division Based on staff headcount ratio.
Finance division Based on staff headcount ratio.
The accounting statements have been presented in United Arab Emirates Dirhams (AED), which is the functional
currency of the company.
92
Sustainability • Capability • Service
3.2. CHANGES IN ACCOUNTING POLICIES
The Company has adopted the following new and amended IFRS and IFRIC
interpretations during the year. Adoption of these revised standards and
interpretations did not have any effect on the financial performance or position of
the Company. They did however give rise to additional disclosures, including in
some cases, revisions to accounting policies.
IFRS 7 Financial Instruments: Disclosures
IAS 1 Amendment – Presentation of Financial Statements
The principal effects of these changes are as follows:
IFRS 7 Financial Instruments: Disclosures
This standard requires disclosures that enable users of the financial statements to
evaluate the significance of the Company’s financial instruments and the nature
and extent of risks arising from those financial instruments. The new disclosures are
included throughout the financial statements. While there has been no effect on
the financial position or results, comparative information has been revised where
needed.
IAS 1 Amendment – Presentation of Financial Statements
This amendment requires the Company to make new disclosures to enable users
of the financial statements to evaluate the Company’s objectives, policies and
processes for managing capital. These new disclosures are shown in note 18.
93
3.3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s accounting statements requires management
to make judgements, estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities, and the disclosures of contingent
liabilities, at the reporting date. However, uncertainty about these assumptions
and estimates could result in outcomes that could require a material adjustment to
the carrying amount of the asset or liability affected in the future.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below:
Assets and liabilities transferred from Abu Dhabi and Al Ain Municipalities
As of 30 June 2005, the assets and liabilities of Sewerage Departments Abu Dhabi
and Al Ain Municipalities of the Government of Abu Dhabi were transferred to the
Company based on the best available information as obtained from the accounting
records of the Government of Abu Dhabi as of 30 June 2005 being the date of the
transfer.
94
Sustainability • Capability • Service
Subsidy
In the absence of an agreed process for the Company to claim the difference
between its Maximum Allowed Revenue (MAR) and the regulated revenues as
determined in its Price Control Return (as communicated by the Regulation and
Supervision Bureau), from the users of its facilities and the Government of Abu
Dhabi, The Company determined its revenue from subsidy based on those rights
and rewards that are confirmed during the period.
Impairment of inventories
Inventories are held at the lower of cost and net realisable value. When inventories
become old or obsolete, an estimate is made of their net realisable value. For
individually significant amounts this estimation is performed on an individual basis.
Amounts which are not individually significant, but which are old or obsolete, are
assessed collectively and a provision applied according to the inventory type and
the Company’s policy for inventory provisioning. The gross inventories were AED
83,905 thousand (2006: AED 84,349 thousand) with provisions for old and obsolete
inventories of AED 69,092 thousand (2006: AED 70,095 thousand).
Useful lives of property, plant and equipment
The Company’s determines the estimated useful lives of its property, plant and
equipment for calculating depreciation. This estimate is determined after considering
the expected usage of the asset or physical wear and tear. Management reviews the
residual value and useful lives annually and the future depreciation charge would
be adjusted where management believes that the useful lives differ from previous
estimates.
95
3.4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Government subsidy
Subsidy in respect of the operations of ADSSC is based on communication between
the Authority on behalf of the Company and the Government of Abu Dhabi. These
are accounted for when the rights to the subsidy are established.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and
any impairment losses. Such cost includes the cost of replacing part of the plant
and equipment when that cost is incurred, if the recognition criteria are met.
Depreciation is provided on all property, plant and equipment, other than capital
work in progress and is calculated on a straight line basis over the estimated useful
life of the asset as follows:
Buildings 25 years
Plant and equipment 5 - 25 years
Motor vehicles 4 years
96
Sustainability • Capability • Service
The carrying amounts of property,
plant and equipment are reviewed for
impairment when events or changes
in circumstances indicate the carrying
value may not be recoverable. If any such
indication exists and where the carrying
values exceed the estimated recoverable
amount, the assets are written down to
their recoverable amount, being the
higher of their fair value less costs to sell
and their value in use.
Expenditure incurred to replace a
component of an item of property, plant
and equipment that is accounted for
separately is capitalised and the carrying
amount of the component that is
replaced is written off. Other subsequent
expenditure is capitalised only when it
increases future economic benefits of
the related item of property, plant and
equipment. All other expenditure is
recognised in the income statement as
the expense is incurred.
97
Capital work in progress
Capital work in progress is included
in property, plant and equipment at
cost on the basis of the percentage
completed at the balance sheet date.
The capital work in progress is transferred
to the appropriate asset category and
depreciated in accordance with the
Company’s policies when construction
of the asset is completed and the asset is
in a location and condition as intended
by the management.
Impairment and uncollectability
of financial assets
An assessment is made at each balance
sheet date to determine whether there
is objective evidence that a specific
financial asset may be impaired. If such
evidence exists, any impairment loss is
recognised in the income statement.
Impairment is determined as the
difference between cost and the present
value of future cash flows discounted at
the current market rate of return for a
similar financial asset.
98
Sustainability • Capability • Service
Inventories
Inventories are stated at the lower of cost, determined on the basis of weighted
average costs and net realisable value. Costs are those expenses incurred in bringing
each item to its present location and condition.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred on completion and disposal.
Receivables
Receivables are stated at original invoice amount less a provision for any uncollectible
amounts. An estimate for doubtful debts is made when collection of the full amount
is no longer probable. Bad debts are written off when there is no possibility of
recovery.
Accounts payable and accruals
Liabilities are recognised for amounts to be paid in the future for goods or services
received, whether or not billed by the supplier or not.
99
Provisions
Provisions are recognised when the Company has an obligation (legal or constructive)
arising from a past event, and the costs to settle the obligation are both probable
and able to be reliably measured.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents consist of
cash in hand and bank balances.
Employees’ end of service benefits
The Company provides end of service benefits to its expatriate employees. The
entitlement to these benefits is based upon the employees’ final salary and length
of service, subject to the completion of a minimum service period. The expected
costs of these benefits are accrued over the period of employment.
With respect to its UAE national employees, the Company makes contribution to
Abu Dhabi Retirement Pensions and Benefits fund calculated as a percentage of the
employees’ salaries. The Company’s obligations are limited to these contributions,
which are expensed when due.
100
Sustainability • Capability • Service
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the
transactions. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date. All differences
are taken to the income statement.
Financial instruments
Financial instruments comprise of financial assets and liabilities.
Financial assets consist of bank balances and cash, due from related parties and
receivables. Financial liabilities consist of term loan from ADWEA, accounts payable,
accruals and due to related parties.
Fair values
Fair values of financial instruments are based on estimated fair values using methods
such as net present values of future cash flows or by reference to the market value
of similar instruments.
3.5. FUTURE CHANGES IN ACCOUNTING POLICIES – STANDARDS
ISSUED BUT NOT YET EFFECTIVE
IAS 1 Presentation of Financial Statements
The Company has not adopted the revised IAS 1 (Presentation of Financial
Statements) which will be effective for the year ending 31 December 2009. The
application of this Standard will result in amendments to the presentation of the
financial statements.
IAS 23 Borrowing Costs
A revised IAS 23 Borrowing costs was issued in March 2007, and becomes effective
for financial years beginning on or after 1 January 2009. The standard has been
revised to require capitalisation of borrowing costs when such costs relate to a
101
qualifying asset. A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale. The Company does not incur
any borrowing costs on its projects being constructed and hence this revision will
have no impact on the Company.
IAS 27 Consolidated and Separate Financial Statements
IAS 27 revised is effective for annual periods beginning on or after 1 July 2009, with
earlier application only permitted when the revised IRS 3 is applied. The revised
standard applies retrospectively with some exceptions. IAS 27 revised no longer
restricts the allocation to minority interest of losses incurred by a subsidiary to
the amount of the non-controlling equity investment in the subsidiary. A partial
disposal of equity interest in a subsidiary that does not result in a loss of control will
be accounted for as an equity transaction and will have no impact on goodwill nor
will it give rise to any gain or loss. Where there is loss of control of a subsidiary, any
retained interest will have to be remeasured to fair value, which will impact the gain
or loss recognised on disposal. The Company does not own any subsidiaries and
hence this revision will have no impact on the Company.
ADSSC Managment team with ADWEA representative
102
Sustainability • Capability • Service
4. (LOSS) PROFIT FOR THE YEAR/PERIOD
The loss for the year/period is stated after charging:
Year ended 31 December 2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Staff costs:
Salaries 61,577 22,563 7,617 91,757
Employees’ end of service benefits, net 3,732 1,069 854 5,655
Other benefits 4,625 1,511 351 6,487
69,934 25,143 8,822 103,899
Depreciation 292,390 61,179 2,508 356,077
Administrative expenses:
Vehicle running cost 3,450 923 351 4,724
Insurance expenses 3,587 1,051 327 4,965
License fee 3,348 1,297 232 4,877
Consultancy charges 8,854 2,949 987 12,790
IT related costs 209 73 12 294
Other expenses 9,067 12,642 648 22,357
28,515 18,935 2,557 50,007
103
From inception to 31 December 2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
60,207 21,886 3,470 85,563
107 42 9 158
1,590 347 257 2,194
61,904 22,275 3,736 87,915
409,135 92,204 3,589 504,928
1,160 1,522 27 2,709
2,398 983 10 3,391
1,333 526 112 1,971
931 260 41 1,232
1,540 465 84 2,089
1,819 508 85 2,412
9,181 4,264 359 13,804
104
Sustainability • Capability • Service
5. PROPERTY, PLANT AND EQUIPMENT
Wastewater
Sewerage treatment Disposal Total
2007 2007 2007 2007
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Property, plant and equipment at net book value 3,621,187 734,497 30,537 4,386,221
Advances to contractors 44,531 6,463 512 51,506
3,665,718 740,960 31,049 4,437,727
Buildings
Cost:
At 1 January 2007 135,981 31,481 - 167,462
Transfers (6,272) 1,363 4,909 -
At 31 December 2007 129,709 32,844 4,909 167,462
Depreciation:
At 1 January 104,188 24,121 - 128,309
Transfers (5,915) 1,869 4,046 -
Charge for the year 3,699 806 102 4,607
At 31 December 2007 101,972 26,796 4,148 132,916
Net carrying amount:
At 31 December 2007 27,737 6,048 761 34,546
Plant and equipment
Cost:
At 1 January 2007 6,572,082 1,482,469 179,292 8,233,843
Transfers 526,328 10,679 20 537,027
Additions 430 167 32 629
At 31 December 2007 7,098,840 1,493,315 179,344 8,771,499
Depreciation:
At 1 January 2007 3,465,214 825,725 158,960 4,449,899
Transfers (27) 10 17 -
Charge for the year 287,565 60,194 2,399 350,158
At 31 December 2007 3,752,752 885,929 161,376 4,800,057
Net carrying amount:
At 31 December 2007 3,346,088 607,386 17,968 3,971,442
105
Wastewater
Sewerage treatment Disposal Total
2007 2007 2007 2007
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Motor vehicles
Cost:
At 1 January 2007 144,954 23,304 443 168,701
Transfers (1,951) 1,073 878 -
At 31 December 2007 143,003 24,377 1,321 168,701
Depreciation:
At 1 January 2007 143,103 23,048 437 166,588
Transfers (1,936) 1,068 868 -
Charge for the year 1,126 177 9 1,312
At 31 December 2007 142,293 24,293 1,314 167,900
Net carrying amount:
At 31 December 2007 710 84 7 801
Capital work in progress
Cost:
At 1 January 2007 591,352 50,219 - 641,571
Transfers (526,360) (10,667) - (537,027)
Additions 181,660 81,427 11,801 274,888
At 31 December 2007 246,652 120,979 11,801 379,432
Total net carrying amount:
At 31 December 2007 3,621,187 734,497 30,537 4,386,221
106
Sustainability • Capability • Service
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
Wastewater
Sewerage treatment Disposal Total
2006 2006 2006 2006
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Property, plant and equipment at net book value 3,731,864 714,579 20,338 4,466,781
Advances to contractors 47,491 3,958 1 51,450
3,779,335 718,537 20,339 4,518,231
Buildings
Cost:
At 1 July 2005 as transferred from Government 135,981 31,481 - 167,462
of Abu Dhabi and balance at 31 December 2006
(note 11)
Depreciation:
At 1 July 2005 as transferred from Government 98,578 22,822 - 121,400
of Abu Dhabi
Charge for the period 5,610 1,299 6,909
At 31 December 2006 104,188 24,121 - 128,309
Net carrying amount:
At 31 December 2006 31,793 7,360 - 39,153
Plant and equipment
Cost:
At 1 July 2005 as transferred from Government 6,263,577 1,482,469 179,292 7,925,319
of Abu Dhabi (note 11)
Transfers 293,210 - - 293,210
Additions 15,295 19 - 15,314
At 31 December 2007 6,572,082 1,482,469 179,292 8,233,843
Depreciation:
At 1 July 2005 as transferred from Government 3,065,596 736,094 155,372 3,957,062
of Abu Dhabi (note 11)
Charge for the period 399,618 89,631 3,588 492,837
At 31 December 2006 3,465,214 825,725 158,960 4,449,899
Net carrying amount:
At 31 December 2006 3,106,868 656,744 20,332 3,783,944
107
Wastewater
Sewerage treatment Disposal Total
2006 2006 2006 2006
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Motor vehicles
Cost:
At 1 July 2005 as transferred from
Government of Abu Dhabi and
balance at 31 December 2006 (note 11) 144,954 23,304 443 168,701
Depreciation:
At 1 July 2005 as transferred from
Government of Abu Dhabi (note 11) 139,196 21,774 436 161,406
Charge for the period 3,907 1,274 1 5,182
At 31 December 2006 143,103 23,048 437 166,588
Net carrying amount:
At 31 December 2006 1,851 256 6 2,113
Capital work in progress
Cost:
At 1 July 2005 as transferred from
Government of Abu Dhabi (note 11) 402,135 6,729 - 408,864
Transfers (293,210) - - (293,210)
Additions 482,427 43,490 - 525,917
Net carrying amount:
At 31 December 2006 591,352 50,219 - 641,571
Total net carrying amount:
At 31 December 2006 3,731,864 714,579 20,338 4,466,781
The activities of the Company are carried out from premises and equipment constructed on land leased from
the Government of Abu Dhabi at no cost.
108
Sustainability • Capability • Service
6. INVENTORIES
Year ended 31 December 2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Spare parts and consumables 59,752 20,349 3,804 83,905
Less: provision for slow moving and
obsolete inventories (49,203) (16,757) (3,132) (69,092)
10,549 3,592 672 14,813
7. AMOUNT DUE FROM GOVERNMENT OF ABU DHABI
Year ended 31 December 2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Government of Abu Dhabi undertaking -
Employees’ end of service benefits 15,514 6,579 1,257 23,350
The Government of Abu Dhabi has undertaken to meet the cost of all employees’ end of service benefits and annual
leave benefit entitlements accruing to employees up to 30 June 2005. All benefits accruing to employees after
this date will be met by the Company.
109
From inception to 31 December 2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
69,862 13,466 1,021 84,349
(58,057) (11,189) (849) (70,095)
11,805 2,277 172 14,254
From inception to 31 December 2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
25,040 9,882 2,085 37,007
110
Sustainability • Capability • Service
8. AMOUNTS DUE FROM RELATED PARTIES
2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Abu Dhabi Transmission and
Despatch Company 264 107 23 394
Abu Dhabi Water and Electricity Authority 133,286 53,990 11,805 199,081
133,550 54,097 11,828 199,475
Amounts due from related parties are neither past due nor impaired (2006: same)
9. SHARE CAPITAL
Authorised, issued and fully paid
31 December 2007 and 2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Ordinary shares of AED 10 each 8,194 1,743 63 10,000
111
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
28 7 1 36
45,093 11,763 1,318 58,174
45,121 11,770 1,319 58,210
112
Sustainability • Capability • Service
10. PROPOSED INCREASE IN SHARE CAPITAL
2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Total funding for projects approved by WED 3,647,633 768,732 25,035 4,441,400
Movement
At beginning of the year/period 3,677,819 744,312 19,499 4,441,630
Movement between businesses (29,997) 24,458 5,539 -
Adjustment (189) (38) (3) (230)
At 31 December 3,647,633 768,732 25,035 4,441,400
The proposed increase in share capital will be transferred to share capital on the completion of all legal formalities which are under progress.
The share capital and proposed increase in share capital represent the value of net assets transferred from Abu Dhabi and Al Ain Municipalities to the Company as of 30 June 2005.
11. GOVERNMENT OF ABU DHABI ACCOUNT
Abu Dhabi Water And Electricity Account
2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Abu Dhabi Water and Electricity
Authority account 572,977 93,748 9,915 676,640
Balance at 31 December
MovementAt 1 January and transfer from
the Government of Abu Dhabi Account 456,035 73,235 7,441 536,711
Projects costs for the year 116,942 20,513 2,474 139,929
At 31 December 572,977 93,748 9,915 676,640
In accordance with arrangements agreed between the Finance Department of the Government of Abu Dhabi (Government) and the Authority on behalf of the Company, the Government has committed to fund all ongoing projects approved by the Abu Dhabi and Al Ain Municipalities or committed prior to 1 July 2005 against increasing the Government’s shareholding in the equity of the Authority. Accordingly, the Authority has resolved to increase its share in the equity of the Company by the amount of the funding made for projects approved and committed prior to 1 July 2005.
In view of the above, the Government account as of 1 January 2007 has been transferred to the Authority’s account.
113
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
3,677,819 744,312 19,499 4,441,630
3,637,616 779,140 24,874 4,441,630
40,203 (34,828) (5,375) -
- - - -
3,677,819 744,312 19,499 4,441,630
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
- - - -
- - - -
- - - -
- - - -
114
Sustainability • Capability • Service
12. AMOUNT DUE TO ABU DHABI WATER AND ELECTRICITY AUTHORITY
2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Abu Dhabi Water and Electricity
Authority (Authority) 73,281 6,795 1,101 81,177
This represents amounts paid by the Authority to the Company’s Projects committed after 1 July 2005.The funding will be converted into an interest free and unsecured loan. No terms of repayment have been specified for the funding and it is subject to the terms of repayment as resolved by the Board of Directors of the Company and agreed by the Authority.
13. EMPLOYEES’ END OF SERVICE BENEFITS
The Company provides for employees’ end of service benefits in accordance with the employees’ contracts of employment.
The movements in the provision for employees’ end of service benefits are as follows:
2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Balance at beginning of the year/period 22,551 8,898 1,878 33,327Provision transferred at the beginning
of the year/period - - - -
Provided during the year/period 3,501 1,002 801 5,304
Transfer from related parties 348 147 28 523
Amounts paid during the year/period (7,115) (2,807) (593) (10,515)Excess provision reversed during
the year/period (2,127) (839) (177) (3,143)
Balance at 31 December 17,158 6,401 1,937 25,496
115
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
36,375 - - 36,375
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
- - - -
46,444 18,326 3,868 68,638
107 42 9 158
397 157 33 587
(24,397) (9,627) (2,032) (36,056)
- - - -
22,551 8,898 1,878 33,327
116
Sustainability • Capability • Service
14. ACCOUNTS PAYABLE AND ACCRUALS2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Trade accounts payable 6,101 2,471 540 9,112
Accrued expenses 33,627 13,270 2,829 49,726
39,728 15,741 3,369 58,838
15. AMOUNTS DUE TO RELATED PARTIES2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Bainoumah Power Company 28 9 2 39
Abu Dhabi Distribution Company-ADDC 16,318 5,558 1,039 22,915
Al Ain Distribution Company-AADC 9,167 3,121 587 12,875
25,513 8,688 1,628 35,829
16. RELATED PARTY TRANSACTIONS
These represent transactions with related parties, i.e., other subsidiaries of Abu Dhabi Power Corporation and Abu Dhabi Water and Electricity Authority, the Government of Abu Dhabi, and directors and key management personnel of the Company and entities controlled by jointly or significantly influenced by such parties. Pricing policies and terms of transactions are approved by ADWEA, the Company’s ultimate holding Company.
Transactions included in the income statement are as follows:
2007
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
Government of Abu Dhabi
Government subsidy 254,413 103,054 22,533 380,000
Other related parties
Cost of sales and administrative and other expenses Hire of vehicles from Al Wathba Company
for Central Services 948 327 64 1,339
Administrative service charge from ADWEA 10,627 4,086 730 15,443
Purchase of water and electricity from ADDC 13,575 4,623 864 19,062
Purchase of water and electricity from AADC 5,019 1,709 320 7,048
Connections fees ADDC - - - -
117
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
5,714 1,491 167 7,372
24,214 6,315 708 31,237
29,928 7,806 875 38,609
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
35 7 1 43
20,210 3,702 297 24,209
3,581 657 53 4,291
23,826 4,366 351 28,543
2006
Wastewater
Sewerage treatment Disposal Total
AED ‘000 AED ‘000 AED ‘000 AED ‘000
157,484 41,078 4,606 203,168
132 30 5 167
5,741 2,265 478 8,484
23,411 4,289 344 28,044
8,435 1,545 124 10,104
94 17 2 113
118
Sustainability • Capability • Service
Compensation of key management personnelThe remuneration of directors and other members of key management during the period was as follows:
From inception to
31 December
2007 2006
AED ‘000 AED’ 000
Short-term benefits 4,113 3,518
Employees’ end of service benefits 214 101
OthersThe activities of the Company are carried out from premises and equipment constructed on land leased from the Government of Abu Dhabi at no cost.
Amount due from and to related parties are disclosed in notes 7, 8, 12 and 15.
17. CAPITAL COMMITMENTS
The estimated capital expenditure contracted for at the balance sheet date but not provided for amounted to AED 1,859,157 thousand (2006: AED 382,845 thousand)
119
18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Risk is inherent in the Company’s activities and is managed through a process
of ongoing identification, measurement and monitoring, subject to risk limits
and other controls. This process of risk management is critical to the Company’s
continuing profitability and each individual within the Company is accountable for
the risk exposures relating to his or her responsibilities.
Interest rate risk
The Company is not currently exposed to interest rate risk, as the majority of its
monetary assets and liabilities are not subject to interest rates exposures.
Foreign currency risk
Management considers that the Company is not exposed to significant currency
risk. The majority of its transactions and balances are in either UAE Dirhams or US
Dollars. As the UAE Dirham is pegged to the US Dollar, balances in US Dollars are
not considered to represent significant currency risk.
Liquidity risk
The Company limits its liquidity risk by monitoring its current financial position in
conjunction with its cash flow forecasts and close communication with its parent
(ADWEA) on a regular basis to ensure funds are available to meet its commitments
for liabilities as they fall due.
The table below summarises the maturity profile of the Company’s financial liabilities
at 31 December 2007 based on contractual undiscounted payments.
120
Sustainability • Capability • Service
Capital management
The primary objective of the Company’s capital management is to ensure that it
maintains a healthy capital ratio in order to support its business and maximize the
shareholder’s value.
The Company manages its capital structure and makes adjustments to it in light
of changes in economic conditions and close discussions and coordination of its
objectives and strategy with its parent. To maintain or adjust the capital structure, the
Company may adjust the return on capital or equity to its shareholder or increase its
share capital. No changes were made in the objectives, policies or processes during
the year ended 31 December 2007 and period ended 31 December 2006.
Capital comprises of share capital, proposed increase in share capital, amounts due
to the Parent and accumulated losses and is measured at AED 4,360,376 thousand
(2006: AED 4,444,682 thousand).
Less than 3 3 to 12 1 to 5
months months years Total
AED’000 AED’000 AED’000 AED’000
Year ended 31 December 2007
Construction creditors and retention payable 205,220 - 15,262 220,482
Accounts payable - 9,112 - 9,112
Total 205,220 9,112 15,262 229,594
Period ended 31 December 2006
Construction creditors and retentions payable 110,739 - 8,254 118,993
Accounts payable - 7,372 - 7,372
Total 110,739 7,372 8,254 126,365
121
19. FAIR VALUE
The fair value of the Company’s financial assets and liabilities approximates their
carrying amounts at the balance sheet date.
20. MAXIMUM ALLOWED REVENUE
In accordance with its provisional Price Control Return as communicated to the
Company by the Regulation and Supervision Bureau, the maximum allowed
revenue (MAR) for the period ended 31 December 2006 and the year ended 31
December 2007 amounted to AED 1,981 million and AED 1,617 million respectively.
In the absence of an agreed process to claim the difference between the MAR and
its regulated revenues from the users of its facilities or the Government through
additional subsidies, such amounts have not been recognized in these accounting
statements.