Cull, Gordon, Gingrich& Harris

Transcription

1 /. Cull, Gordon, Gingrich& Harris Chartered Ncountants 152-3ManitobaStreet Bracebridge,ON,P1L 1Z9 (705) Tel. (705) Fax GRA VENHURST HYDRO ELECTRIC INC. FINANCIAL STATEMENTS DECEMBER 31,2004 Bracebridge F. GlennGordon,LA. ParrySound DonaldT. J.Cull,LA. StephenL. Gingrich,LA., CFP Brandy L. Harris, B.ACL,CA

2 Cull, Gordon, Gingrich& Harris Chartered ~countants 152-3ManitobaStreet Bracebridge,ON,P1L 1Z9 (705) Tel. (705) Fax AUDITORS' REPORT To the Members of the Board, Members of Council, Inhabitants and Ratepayers of The Corporation of the Town of Gravenhurst We have audited the Statement of Financial Position of Gravenhurst Hydro Electric Inc. as at December 31, 2004, and the Statements of Changes in Financial Position, Operations and Retained Earnings for the year then ended. These Financial Statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with generally accepted Canadian auditing standards. Those audit to obtain reasonable standards assurance require that we plan and whether the Financial perform an Statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Financial Statement presentation. In our opinion, these Financial Statements present fairly, in all material respects, the fmancial position of the Company as at December 31, 2004, and the results of its operations for the year then ended in accordance with the accounting principles disclosed in Note 1 to the Financial Statements. Bracebridge F. Glenn Gordon, C.A. Parry Sound Donald T. J. Cull,C.A. Bracebridge, Ontario March 15, 2005 StephenL.Gingrich, C.A., CFP Brandy L. Harris, B.ACC.,C.A.

3 STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, ASSETS Current Cash $ 508,209 $ 661,215 Accounts Receivable, net of Allowance for Doubtful Accounts of $24,000 ( $10,000) 945, ,644 Unbilled Revenue 1,074,311 1,023,400 Income Taxes Receivable 125,272 0 Inventories 196, ,415 Due from Related Companies - Note 6 75,450 71,785 Other Current Assets $ Capital Land and Land Rights $ 679,033 $ 678,146 Buildings 563, ,763 Distribution Stations 791, ,511 Subtransmission Feeders 595, ,948 Distribution - Overhead 3,237,268 3,069,985 Distribution Underground 1,698,384 1,343,314 Distribution Meters 1,284,460 1,231,868 Distribution - Transformers 2,333,028 2,217,014 Customer Service Overhead 936, ,322 Customer Service - Underground 374, ,021 Transportation Equipment 877, ,895 Office Equipment 416, ,326 Miscellaneous Equipment $ 13,906,681 $ 13,066,550 Less Contributions in aid of Capital f \ fl \ $ 11,758,722 $ 11,257,300 Less Net Accumulated Amortization f \ f \ $ $ Other Assets Incorporation Costs $ 8,816 $ 8,816 Regulatory Transition Costs 131, ,577 Net Regulatorv Assets/Variance Accounts $ $ $ 10,169,212 $ 10,254,135 The accompanying notes are an integral part of these Financial Statements.

4 STATEMENT OF FINANCIAL POSITION (continued) AS AT DECEMBER 31, LIABILITIES Current Accounts Payable and Accrued Liabilities $ 945,891 $ 806,393 Income Taxes Payable 0 259,575 Current Portion of Long Term Debt 193, ,000 Current Portion of Customer Deposits 23, ,743 Due to Related Companies - Note 6 7,195 0 Other Current Liabilities $ Long Tenn Debt - Note 4 Promissory Note $ 4, $ Promissory Note Less Payments due within one year Other Long Term Customer Deposits $ 65,749 $ 34,594 Employee Future Benefits - Note 7 92,276 92,345 Net Regulatorv Liabilities/Variance Accounts 266, ,858 $ Due to Shareholder - Note 5 Due to Town of Gravenhurst $ $ SHAREHOLDER EQUl'!Y Share Capital Authorized: Unlimited common shares Issued: 500 common shares $ 2,085,925 $ 2,085,925 Retained EaminQs ,991 $ $ 10,169,212 $ 10,254,135 The accompanying notes are an integral part of these Financial Statements

5 STATEMENT OF CHANGES IN FINANCIAL POSITION FOR THE YEAR ENDED DECEMBER 31, OPERA TIONS Net Income for the year $ 459,829 $ 765, ,219!L- $ 1,068,048 $ Sources and uses of Cash in Operations: Accounts Receivable (7,210) (589,292) Unbilled Revenue (50,911) 695,235 Inventories (28,951) 50,739 Due from (to) Related Companies 3,530 (22,484) Other Current Assets 10, Regulatory Transition Costs (22,329) (1,248) Accounts Payable and Accrued Liabilities 139,498 61,641 Income Taxes Receivable/Payable (384,847) 208,759 Customer Deposits (87,237) 11,902 Other Current Liabilities 24,603 (12,324) Regulatory Assets/Liabilities 365,673 (254,010) Emplovee Future Benefits (69) (1.845 Cash provided bl.l Operations $ $ INVESTING ACTIVITES Purchase of Capital Assets $ (547,443) $ Proceeds of disposition of Capital Assets Cash used in Investina Activities FINANCING ACTIVITES Repayment of Long Term Debt $ (186,000) $ Repavment of Due to Shareholder Cash used in Financina Activities >:\) (. I >:\) Increase (Decrease) in Cash $ (153,006) $ 483,424 Cash. beoinnino of vear CASH, END OF YEAR $ 508,209 $ 661,215 The accompanying notes are an 'integral part of these Financial Statements.

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7 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, THE ORGANIZATION Gravenhurst Hydro Electric Inc. is a wholly-owned subsidiary of Gravenhurst Power Inc., which is in turn wholly-owned by the Corporation of the Town of Gravenhurst. In accordance with various regulations of the Province of Ontario, Gravenhurst Hydro Electric Inc. became a taxable entity on October 1, On this date, the company begin making payments in lieu of taxes, equivalent to federal and provincial income and capital taxes, to the Ontario Electricity Financial Corporation, to pay down the residual debt of the former Ontario Hydro. 2. SIGNIFICANT ACCOUNTING POLICIES The Financial Statements' of Gravenhurst Hydro Electric Inc. have been prepared in accordance with accounting policies for Municipal Electrical' Utilities in Ontario as required by the Ontario Energy Board under the authority of the Ontario Energy Board Act, 1998, and reflect the following policies as set forth in the Ontario Energy Board Accounting Procedures Manual. (a) Capital Assets Capital assets are recorded at cost. Costs for capital assets installed by the Commission include material, labour and overhead. Amortization of the assets, and the related Contributions and Grants in aid of Capital, is provided as follows: Land Rights Buildings Distribution Equipment Transportation Equipment Office Equipment Miscellaneous Equipment - Straight line basis over 25 years - Straight line basis over 25 to 50 years Straight line basis over 25 to 35 years Straight line basis over 5 to 10 years Straight line basis over 5 to 10 years Straight line basis over 8 to 10 years

8 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Inventories Inventories consist of repair parts, supplies and materials valued at the lower of cost and replacement cost. (c) Service Revenue Service Revenue is recorded on the basis of regular meter readings and estimates of customer usage since the last meter reading date to the end of the year. (d) Use of Estimates Since precise determination of many assets and liabilities is dependent upon future events, the preparation of periodic financial statements in accordance with generally accepted accounting principles necessarily involves the use of estimates and approximations. These have been made using careful judgments. 3. FINANCIAL INSTRUMENTS The company's financial instruments consist of Cash, Short term deposits, Accounts Receivable, Unbilled Revenue, Accounts Payable and Accrued Liabilities, Customer Deposits, Long Term Debt and Due to Shareholder. Unless otherwise noted, it is management's opinion that the company is not exposed to significant interest, currency or credit risk from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless other wise noted.

9 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, LONG TERM DEBT Promissory Note issued to the Town of Gravenhurst, interest only of $1,500 per month $ o $ 200,000 Promissory Note issued to the Town of Gravenhurst, with interest at 5.15% per annum in 2000, increasing to 6.25% per annum by 2009, final payment due in 2009, extendable for another ten years at the option of the Town, with interest payable on January 5 and July 5 of each year Current portion 4,363,000 ( ) 4,649,000 ( ) Net Long Term Debt $ $ Principal payments over the next five years are as follows: $ 193, , , ,000 3,636, DUE TO SHAREHOLDER Due to Shareholder is non-interest bearing, with no set terms of repayment, and is not due within one year. During the year, the company paid $250,000 ( $NIL) to the Town of Gravenhurst, in addition to $200,000 ( $250,000) under the Promissory Note referred to in Note

10 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, RELATED PARTY TRANSACTIONS Under the terms of the Promissory Notes issued to the Town of Gravenhurst on November 1,2000 and November 1,2002, the Company paid interest of $4,083 to the Town for the year ended December 31, 2004 ( $311,311). Of this amount, $NIL ( $140,330) is included in Other Current Liabilities on the Statement of Financial Position. Due from Related Companies of $75,450 ( $69,302) on the Statement of Financial Position represents accounts paid by Gravenhurst Hydro Electric Inc. on behalf of its parent company, less a Management Fee charged by the parent company of $22,291 ( $NIL), which is included in Administrative and General Expenditures on the Statement of Operations. Due from (to) Related Companies of $(7,195) ( $2,483) on the Statement of Financial Position represents amounts billed and collected by Gravenhurst Hydro Electric Inc. on behalf of its sister company, less management fees charged to that company. Management Fees are fees charged to Gravenhurst Energy Services Inc., in accordance with a contract, for preparation and mailing of bills, and bookkeeping services. 7. EMPLOYEE FUTURE BENEFITS Gravenhurst Hydro Electric Inc. pays life insurance benefits on behalf of its retired employees. In accordance with standards adopted by the Canadian Institute of Chartered Accountants on January 1,2000, Gravenhurst Hydro Electric Inc. recognizes post-retirement costs in the period in which the employee renders the servic~. Information about Gravenhurst Hydro Electric Inc.'s defined benefit program is as follows: Accrued benefit liability, beginning of year Expense for the year Contributions for the year Accrued Benefit Liability, end of year $ 92,345 6,764 (6.833) $ $ 94,189 6,829 (8.673) $

11 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, EMPLOYEE FUTURE BENEFITS (continued) The main actuarial. assumptions employed for the valuation are as follows: (a) General Inflation - Future general inflation levels, as measured by changes in the Consumer Price Index (CPI), were assumed at 3.5% for 2002 and thereafter. (b) Interest (discount) rate - The obligation as at December 31,2004, of the present value of future liabilities and the expense for the twelve months ended December 31, 2004, were determined using an annual discount rate of 6%. This corresponds to the assumed CPI rate plus an assumed real rate of return of 2.5%. (c) Salary levels - Future general salary and wage levels were assumed to increase at 2% per annum. (d) Medical costs - Medical costs were assumed to increase at the CPI rate plus a further increase of 4% in 2001, graded down to 1% in 2004 and thereafter. (e) Dental costs - Dental costs were assumed to increase at the CPI rate plus a further increase of 1% in 2001 and thereafter.

12 SCHEDULE 1 - OTHER OPERATINGREVENUE FOR THE YEAR ENDED DECEMBER 31, Late payment charges $ 35,578 $ 54,622 Interest earned 20,960 20,359 Pole rentals 49,605 49,605 Change of occupancy charges 8,380 8,950 Reconnection charges 2,700 2,000 Miscellaneous 3,018 11,730 Sale of scrap material 214 7,806 Gain (Loss) on disposal of assets 0 12,000 Management Fees - Note $