BE GAAP. Condensed financial statements 30 June Clean watercourses for successive generations and a living environment in harmony with water

Transcription

1 AQUAFIN.BE 2017 Condensed financial statements 30 June 2017 BE GAAP Clean watercourses for successive generations and a living environment in harmony with water

2 2 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

3 Contents 4 First half of the year in a nutshell 7 Significant events between 1 January 2017 and 30 June 2017 and principal risks and uncertainties for the remainder of the financial year 11 Key figures 12 Condensed financial statements Balance sheet and income statement Audit report Notes on the balance sheet and income statement AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 3

4 First half of the year in a nutshell Due to the extremely dry first half of the year, not only many farmers, but also water-intensive industrial plants, were faced with problems in June. Water restrictions and local bans on collecting ground and surface water made the situation even more acute. For Aquafin, this was an opportunity to raise awareness of the potential and availability of treated waste water once more. After all, our so-called effluent is totally suitable for recycling, directly or after further treatment, depending on the purpose. The media attention focussed on this source of 1 billion m 3 of water per year certainly had an impact. Especially in West Flanders, our offer for the collection of treated waste water from one of our water treatment plants met with an enthusiastic response. This led to over 37 new contracts. Together with the Belgian Farmers Association, the provincial councils and municipalities, we will now investigate what is necessary in order to use treated waste water as an alternative to other water sources more systematically. A good example of how water treatment can also contribute to a circular economy. The same drought also affected the treatment efficiency of our water treatment plants during the last half-year, but in a positive way. The less the waste water is diluted with rainwater, the more efficient the treatment process. On 30 June, therefore, 288 of the 305 waste water treatment plants assessed, or 94.43%, complied with all applicable standards. Meanwhile, we obviously also continued to work towards the completion of the projects assigned to us. As far as calls for tenders were concerned, at the end of June we were on track to meet our challenging annual target. However, it will be difficult to put the total annual volume set of 160 million euros of new projects out to tender. This is because, since the introduction of the Integrated Environmental Permit in February, there have been ongoing problems with the submission of applications via the new digital platform, seriously delaying project preparations. Although, in anticipation of the new procedure, we put as many projects out to tender as possible at the beginning of 2017, this will still have an impact on the pace of our tendering process as from the final months of the year. 4 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

5 Even more than in the past, attention is focussed on safety in the completion of projects and operation of our plants. Besides our technical expertise and meticulous project management, our customers, employees and partners should also be able to count on our absolute commitment to thinking and acting safely. We therefore set our safety target at strictly zero accidents. Our employees are authorised to stop or shut down activities immediately if they are not being carried out safely. We expect the same commitment from our technical partners. We informed them of this in writing at the beginning of this year. Our determination is demonstrated by the fact that we have already applied the STOP principle several times. We also continue to work on raising strong awareness of safety internally in order to avoid any accidents. AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 5

6 6 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

7 Significant events BETWEEN 1 JANUARY 2017 AND 30 JUNE 2017 AND PRINCIPAL RISKS AND UNCERTAINTIES FOR THE REMAINDER OF THE FINANCIAL YEAR REMUNERATION MODEL On 7 June 2013, the Flemish Government approved the model for the annual remuneration of Aquafin s operating costs in the form of a trial model. This model is better known as the performance budget and is used to calculate the operating costs for the years of 2014 to 2016 inclusive. The Financial Regulator (Flemish Environment Agency) thoroughly evaluated the model. Based on the evaluation carried out by the Flemish Environment Agency in 2015 and the additional comments from Aquafin, the Inspector General of Finances proposed to calibrate the model. This led to Aquafin developing a new, revised model, in close consultation with the Financial Regulator. We allocated the costs across the various business processes and performed a new more in-depth analysis of the activities driving Aquafin s costs. In the proposed model, we related the majority of the working capital under the Management Agreement to a small number of pre-defined outputs, at a price level considered reasonable, based on a series of assumptions. The budget calculated is a total budget for Aquafin as a whole, without creating partitions between packages, or between personnel costs and other operating costs.this formula ensures a more stable result than the original formula. During the budget consultations on 23 February 2016 attended by the Flemish Environment Agency, the Office of Environment, Nature and Agriculture, the Office of the Budget, the Budget Administration and the Financial Inspectorate the revised formula was applied for the first time to the 2017 operating budget. The formula is currently awaiting approval by the Flemish Government. We expect a decision in the autumn of ASSET MANAGEMENT PROTOCOL APPROVED The Flemish coalition agreement also provides for support for the supra-municipal sanitation infrastructure via maintenance and replacement in order to prevent faults in a timely manner. The Management Agreement between Aquafin and the Flemish Region merely recognises a procedure for investing in projects via the annual optimisation programme. There is no specific procedure for the replacement and improvement of the infrastructure. However, there is the Proce- AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 7

8 SIGNIFICANT EVENTS dure for replacement investments and miscellaneous investment budgets, which allows Aquafin to carry out limited investments in existing infrastructure. But this procedure was not sufficient to meet the ever-increasing need for investment in existing assets. Following constructive discussions with the Financial Regulator, the Flemish Government approved the asset management protocol on 14 July This protocol sets out a specific procedure for carrying out asset management projects in an efficient and transparent manner. This means that we can carry out such projects faster, with less formalities and in due consultation with the Financial Regulator. The aim is to trial this procedure for several years and then evaluate it. The asset management budget for 2017 is 21 million euros, an amount which will increase further in future. DELIVERIES AND SUBSEQUENT COSTS Deliveries In the past, the Delivery protocol has clarified the provisions of the Management Agreement concerning the delivery of investment projects. This has given Aquafin greater legal certainty. When delivering a project, Aquafin acquires firm claims against the water companies, with the Flemish Region acting as co-debtor. The total amount of these claims forms the cap on the outstanding long-term loans under the allocation agreement 1. Deliveries are therefore directly linked to the amount of long-term loans that can be taken out. So far, this protocol has not lived up to expectations. Since the latest version came into force, on 1 March 2016, deliveries have not progressed smoothly. This is mainly due to administrative reasons and the conditions imposed by the government. These take the form of preconditions for a project, meaning that Aquafin relies on the actions of third parties before a project can be delivered. At the end of 2016, the total investment value of projects whose delivery was challenged amounted to 18.2 million euros. In the first half of 2017, 12.2 million euros of this was regularised by the Minister for the Environment, Nature and Agriculture. The investment value including associated costs for projects which were ready for operation but could not yet be delivered, submitted by 30 June 2017, amounts to 24 million euros. Based on the inventory made by us of projects eligible for delivery in the second part of 2017, we expect that investments amounting to 9 million euros could encounter problems. In view of this, the provision for projects yet to be delivered has been increased to 3.4 million euros. 1 The allocation agreement stipulates that, should Aquafin find itself in financial difficulties, the water companies will no longer have to pay Aquafin for the treatment of the drinking water supplied by them, but Belfius Bank, which acts as agent under the agreement. 8 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

9 Subsequent costs The Financial Regulator can dispute subsequent costs, which are not yet known for certain at the time of delivery. There is no definitive protocol for this at present. Aquafin has submitted a proposal, which resulted in a counter-proposal from the Financial Regulator in July Further discussions on this proposal have taken place with the Office for the Environment in The Office for the Environment, the Flemish Environment Agency and Aquafin are all committed to resolving this matter as swiftly as possible. The total amount of subsequent costs deducted for the period from 2014 to the first half of 2017 inclusive is around 6 million euros. These deducted costs are evaluated according to the protocol for Subsequent Costs. Costs yet to be rebilled are also included in the evaluation. On the basis of this evaluation, the provision for subsequent costs has been adjusted to 0.9 million euros. First of all, the following matters need to be resolved: Remuneration model (performance budget): as set out above, for the first time in the period of , the operating budget was calculated using the formula for the performance budget. During the trial period, it proved difficult to determine one of the parameters of the formula people equivalents for certain. The Financial Regulator and Aquafin reached a consensus on this during Aquafin expects approval from the Flemish Government in the autumn of Subsequent costs: as set out above, there is still no clarity regarding how costs recorded after the delivery of a project should be rebilled. The Financial Regulator and Aquafin are currently discussing a draft protocol to resolve this. Aquafin hopes to conclude these discussions shortly. CLOSURE OF FINANCIAL YEARS Following the closure of the 2013 financial year in accordance with the provisions of the Management Agreement at the end of the previous year, we also expect the 2014 to 2016 financial years to be able to be closed by the end of this year. Once the above items have been dealt with, there will be nothing to prevent the closure of the last three financial years. AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 9

10 SIGNIFICANT EVENTS JOINT VENTURE WITH RIO-LINK Renegotiation of service agreement with rio-link On 28 June 2017, Aquafin signed a new subcontracting agreement with rio-link, which coincides with the sale of Aquafin s shares in rio-link. The main adjustments consist in: an extended period, i.e. a fixed period of 15 years; the (re)establishment of a consultative committee in which both parties are equal partners; revised allocation of duties between the parties, whereby rio-link can do some project management and asset management is assigned to Aquafin. Sale of shares in rio-link to water-link Since 2011, Aquafin had a participating interest in riolink representing one third of the total number of shares. Aquafin also had the right to nominate three (one third) of the directors. Aquafin s stake in rio-link was sold to water-link (formerly AWW) on the signature of the aforementioned service agreement, which perpetuates the present cooperation with rio-link. 10 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

11 Key figures as at 30 June 2017 (IN THOUSANDS OF EUROS) Operating income 250, ,082 Profit available for appropriation 6,293 8,202 Balance sheet total 3,409,337 3,392,755 Equity excluding investment grants 276, ,252 Short-term financing 171, ,869 Long-term financing 1,932,900 1,880,094 NUMBER Aquafin employees 1,024 1,008 Flemish Environment Agency employees TOTAL EMPLOYEES 1,085 1,071 As of 30 June 2017, Aquafin was responsible for the operation of 305 waste water treatment plants. To transport the waste water to the treatment plants, Aquafin managed 6,026 km of pipes. Aquafin manages 1,670 supra-municipal pumping stations and storage settlement tanks. PROJECTS IN PORTFOLIO FOR THE FLEMISH REGION AS AT 30 JUNE 2017 NUMBER OF PROJECTS VALUE (IN MILLIONS OF EUROS) Delivered projects (1) 2,980 3, Awarded and contracted out (2) Design (3) 946 1, TOTAL IN PROGRESS (2) + (3) 4,339 5, AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 11

12 Condensed financial statements BALANCE SHEET (IN THOUSANDS OF EUROS) ASSETS CODES FIXED ASSETS 20/28 3,224,850 3,221,542 Tangible assets 22/27 3,221,696 3,218,407 Land and buildings , ,277 Plant, machinery and equipment 23 2,658,656 2,700,488 Furniture and vehicles 24 2,059 2,359 Leasing and other similar rights Other tangible assets Assets under construction and advance payments , ,538 Financial fixed assets 28 3,154 3,135 Affiliated enterprises 280/1 3,063 3,022 Participating interests 280 3,063 3,022 Other financial fixed assets 284/ Shares Amounts receivable and cash guarantees 285/ CURRENT ASSETS 29/58 184, ,212 Stocks and contracts in progress 3 96,048 99,135 Contracts in progress 37 96,048 99,135 Amounts receivable within one year 40/41 16,262 20,931 Trade debtors 40 10,672 17,755 Other amounts receivable 41 5,591 3,176 Current investments 50/ Other investments 51/ Cash 54/58 29,985 5,204 Deferred charges and accrued income 490/1 42,190 45,943 TOTAL ASSETS 20/58 3,409,337 3,392, AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

13 BALANCE SHEET (IN THOUSANDS OF EUROS) CODES LIABILITIES EQUITY 10/15 1,099,399 1,088,416 Capital , ,400 Issued capital , ,400 Uncalled capital 101 Reserves 13 21,852 21,852 Legal reserve ,252 13,252 Available reserve 133 8,600 8,600 Profit carried forward 14 6,301 8 Investment grants , ,155 PROVISIONS AND DEFERRED TAXES 16 5,777 3,861 Provisions for liabilities and charges 160/5 5,777 3,861 Pensions and similar obligations Other liabilities and charges 163/5 5,021 3,025 AMOUNTS PAYABLE 17/49 2,304,161 2,300,479 Amounts payable after more than one year 17 1,789,879 1,735,263 Financial debts 170/4 1,789,651 1,735,050 Leasing and other similar obligations Credit institutions 173 1,789,651 1,735,050 Other amounts payable 178/ Amounts payable within one year 42/48 490, ,589 Current portion of amounts payable after more than one year , ,044 Financial debts , ,355 Credit institutions 430/8 185, ,355 Trade debts 44 55,146 73,800 Suppliers 440/4 55,146 73,800 Advances received on contracts in progress 46 91,071 93,352 Taxes, remuneration and social security 45 15,493 14,250 Taxes 450/3 8,612 5,903 Remuneration and social security 454/9 6,880 8,347 Other amounts payable 47/48 0 7,788 Accrued charges and deferred income 492/3 23,534 10,627 TOTAL LIABILITIES 10/49 3,409,337 3,392,755 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 13

14 INCOME STATEMENT (IN THOUSANDS OF EUROS) CODES Operating income 70/74 250, ,451 Turnover , ,574 Increase in stocks of finished goods, work and contracts in progress 71-3, Own construction capitalised Other operating income 74 6,067 2,070 Operating charges 60/64 203, ,145 Raw materials, consumables and goods for resale 60 51,733 53,927 Purchases 600/8 51,733 53,927 Services and other goods 61 24,273 23,548 Remuneration, social security costs and pensions 62 36,651 34,804 Depreciation and other amounts written off formation expenses, intangible and tangible fixed assets Amounts written down stocks, contracts in progress and trade debtors - appropriations (write-backs) ,689 82, / Provisions for risks and charges - appropriation (uses and write-backs) 635/7 1, Other operating charges 640/8 3,301 3,758 Operating profit ,763 44,306 Financial income 75 18,312 13,200 Income from current assets ,303 13,198 Other financial income 752/9 9 2 Financial charges 65 54,995 51,017 Debt charges ,926 37,435 Other financial charges 652/9 19,069 13,582 Profit on ordinary activities before taxes ,079 6,489 Extraordinary income Write-back of amounts written down financial fixed assets Extraordinary charges Amounts written down financial fixed assets Profit for the period before tax ,147 6,535 Income taxes 67/77 3,854 2,121 Taxes 670/3 3,854 2,121 Adjustment of income taxes and write-back of tax provisions Profit for the period ,293 4,414 Profit for the period available for appropriation ,293 4, AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

15 AUDITOR S REPORT Report of the statutory auditor of Aquafin NV on the limited review of the interim condensed financial statements for the 6 month period ending 30 June 2017 INTRODUCTION We have performed a limited review on the interim condensed balance sheet of Aquafin NV (the Company ) as at 30 June 2017 and the related interim condensed statements of income for the six-month period then ended, and explanatory notes. These statements show a balance sheet total of 3,409,337 (000) and a profit for the 6 month period then ended of 6,293 (000). Management is responsible for the preparation and presentation of these interim condensed financial statements in accordance with the financial reporting framework applicable in Belgium. Our responsibility is to express a conclusion on these interim condensed financial statements based on our review. significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed financial statements as at 30 June 2017 are not prepared, in all material respects, in accordance with the financial reporting framework in Belgium. Diegem, 7 September 2017 Ernst & Young Bedrijfsrevisoren BCVBA Statutory auditor represented by Patrick Rottiers Partner* * Acting on behalf of a BVBA/SPRL SCOPE OF REVIEW We conducted our review in accordance the International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity applicable to review engagements. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all Ref: 18PR0008 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 15

16 NOTES TO BALANCE SHEET AND INCOME STATEMENT NOTES ON THE BALANCE SHEET The position for fixed assets is completely in line with the position as at 31 December The slight increase from 3 million euros to million euros is due to the net growth of investments in the supra-municipal water treatment infrastructure, carried out on behalf of the Flemish Region. On the one hand, there has been a net increase of work in progress of 45 million euros compared with the end of This represents the difference between new investments and the transfer from delivered projects to plant, machinery and equipment. On the other hand, the net position for plant, machinery and equipment has decreased by 42 million euros. This is due to increased depreciation, which is only partially offset by a rise in this item due to new investments and the transfer from work in progress. The sharp increase in cash is mainly due to the drawdown of an investment loan on 12 June Due to smaller decreases for the items stocks and contracts in progress, amounts receivable within one year and deferred charges & accrued income, compared with the figures as at 31 December 2016, current assets increased by a net amount of 13 million euros to 184 million euros. Equity has increased by 6 million euros under the item profit carried forward, reflecting results for the period of 1 January June Investment grants 2 also increased by a further 5 million euros. This reflects the impact of the difference between the repayment and depreciation periods for delivered supra-municipal projects. The issues around deliveries and subsequent costs (see detailed explanation on p. 8) have led to a sharp rise in provisions, which increased by 2 million euros overall compared with the position as at 31 December Debts rose by a net amount of just 4 million euros to 2,304 million euros and are therefore on the same level as at 31 December NOTES ON THE INCOME STATEMENT The Management Agreement with the Flemish Region stipulates that Aquafin s remuneration is based on the rebilling of all reasonable costs, plus remuneration for the shareholder(s) based on the contribution to the company s equity. According to the budget model approved by the Flemish Government on 7 June 2013, Aquafin s budget for operating costs for activities falling under the Management Agreement was made dependent on a series of packages, the assets and the pollution load treated. Therefore, Aquafin is no longer remunerated based on the rebilling of all reasonable costs as specified in the Management Agreement, but according to the services rendered as defined in the new remuneration model where the result of the outcome of the formula is considered reasonable. 2 For more information about this item, please refer to the BE GAAP annual report 2016, available on our website 16 AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP

17 The increase in operating income and charges is in line with the growth of the infrastructure developed and operated by Aquafin for supra-municipal activities under the Management Agreement. Aquafin also provides services directly to towns, cities and municipalities. An amount of 2,975 thousand euros is recorded under other operating income. This is the positive difference between the result according to the definitive formula for the remuneration model mentioned above for the years on the one hand and the actual charges recorded for these financial years on the other hand. The provisions for liabilities and charges reflect the increase in provisions for deliveries and subsequent costs by 2 million euros. Financial income and charges cover interest expenses on short and long-term finance and charges and income relating to active interest rate management. The sharp rise in both income from financial assets and other financial charges, both related to active interest rate management, compared with 30 June 2016, is due to changes in the market value of structures which have been optimised. The hedging structures which were optimised in the first half of 2017 had a higher absolute market value than those which were restructured in the first half of This had a significant impact on both income and charges. AQUAFIN CONDENSED FINANCIAL STATEMENTS 30 JUNE BE GAAP 17

18 To develop reliable waste water and stormwater management, tailored to our customers requirements, with respect for those around us and the environment. AQUAFIN NV Colofon Publisher: Jan Goossens, general manager of Aquafin NV Graphic design: Comfi Photography: fotovdb.com, Jan Locus, Misjel Decleer, Frederik Beyens and employees of Aquafin NV Information about Corporate Governance can be found at The condensed financial statements as at 30 June 2017 are also available in Dutch. AQUAFIN NV, DIJKSTRAAT 8, B-2630 AARTSELAAR TEL ~ FAX INFO@AQUAFIN.BE ~ OOK VERKRIJGBAAR IN HET NEDERLANDS