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

2

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


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


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


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


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


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


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


ADSSC is transforming the Abu Dhabi landscape via provision of treated wastewater

1717

Abu Dhabi Sewerage Services Company PJSC

2007 Major Achievements & Activities

1818


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


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

•

•

•


Activities

2222


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


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


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


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


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


Activities

ADSSC monthly newsletter, Elements

3030


3131


Future Plans

3232


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


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


3737


Directors’ Report & Financial Statements

31 December 2007

3838


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


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


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


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


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


STATEMENT OF CHANGES IN EQUITY


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


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

4646


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.

4848


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:


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.


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.

5050


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.

5252


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.

5454


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.

5656


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.

5858


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

6060


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


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

6262


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.

6464


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

6666


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.

6767

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.

6868


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).

6969

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.

70


71


Accounting Statements

31 December 2007

72


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.

74


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


INCOME STATEMENT


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


BALANCE SHEET

At 31 December 2007

Sewerage 2007 2006


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


STATEMENT OF CHANGES IN EQUITY


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


CASH FLOW STATEMENT


Sewerage 2007 2006


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


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


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


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



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



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


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.


appropriate business.


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.


provisions.


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.


provisions.


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.


appropriate businesses. Items of common nature expenses are allocated using

operation and maintenance department costs ratio.

91


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


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.



The principal effects of these changes are as follows:


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.


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


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 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


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 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


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.


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


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


4. (LOSS) PROFIT FOR THE YEAR/PERIOD

The loss for the year/period is stated after charging:


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


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



Wastewater


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


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


At 31 December 2007 3,346,088 607,386 17,968 3,971,442

105

Wastewater


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


At 31 December 2007 710 84 7 801


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



Property, plant and equipment consist of the following:

Wastewater


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


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


At 31 December 2006 3,106,868 656,744 20,332 3,783,944

107

Wastewater


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:


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


At 31 December 2006 1,851 256 6 2,113


Cost:


Government of Abu Dhabi (note 11) 402,135 6,729 - 408,864

Transfers (293,210) - - (293,210)

Additions 482,427 43,490 - 525,917


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


6. INVENTORIES


Wastewater


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


Wastewater


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


Wastewater


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


Wastewater


AED ‘000 AED ‘000 AED ‘000 AED ‘000

25,040 9,882 2,085 37,007

110


8. AMOUNTS DUE FROM RELATED PARTIES

2007

Wastewater


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


AED ‘000 AED ‘000 AED ‘000 AED ‘000

Ordinary shares of AED 10 each 8,194 1,743 63 10,000

111

2006

Wastewater


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


10. PROPOSED INCREASE IN SHARE CAPITAL

2007

Wastewater


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


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


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


AED ‘000 AED ‘000 AED ‘000 AED ‘000

- - - -

- - - -

- - - -

- - - -

114


12. AMOUNT DUE TO ABU DHABI WATER AND ELECTRICITY AUTHORITY

2007

Wastewater


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


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


AED ‘000 AED ‘000 AED ‘000 AED ‘000

36,375 - - 36,375

2006

Wastewater


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


14. ACCOUNTS PAYABLE AND ACCRUALS2007

Wastewater


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


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


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


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


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


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


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


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


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.

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