Abu Dhabi National Energy Company PJSC ( TAQA )

Transcription

1 Abu Dhabi National Energy Company PJSC ( TAQA ) REPORT OF THE BOARD OF DIRECTORS AND INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 SEPTEMBER 2007 (UNAUDITED) E

2 Abu Dhabi National Energy Company PJSC ( TAQA ) REPORT OF THE BOARD OF DIRECTORS 30 SEPTEMBER 2007 (UNAUDITED) E

3 ABU DHABI NATIONAL ENERGY COMPANY ( TAQA ) DIRECTORS REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007 On behalf of the Board

4 Abu Dhabi National Energy Company PJSC ( TAQA ) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 SEPTEMBER 2007 (UNAUDITED) e

5 REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF ABU DHABI NATIONAL ENERGY COMPANY PJSC ( TAQA ) Introduction We have reviewed the accompanying interim condensed consolidated financial statements of Abu Dhabi National Energy Company PJSC ( TAQA or the Company ) and its subsidiaries (the Group ) as at 30 September 2007, comprising of the interim consolidated balance sheet as at 30 September 2007 and the related interim consolidated income statement for the three month period and nine month period then ended and the interim consolidated statements of changes in equity and cash flows for the nine month period then ended and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting ( IAS 34 ). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. 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 International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all 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 consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34. Signed by: Bassam E Hage Partner Ernst & Young Registration No October 2007 Abu Dhabi

6 INTERIM CONSOLIDATED INCOME STATEMENT Period ended Three months ended Nine months ended 30 September 30 September Notes AED 000 AED 000 AED 000 AED 000 Revenues Revenue from water and electricity 3 1,182, ,936 3,447,491 2,371,722 Revenue from oil and gas 308, ,799 - Supplemental fuel and other operating income 937,535-1,275,289 - Gas storage revenue 26, , ,454, ,936 5,290,443 2,371,722 Cost of sales Repairs, maintenance and consumables used (284,961) (242,927) (727,324) (553,700) Fuel expenses (753,511) - (1,252,219) - Depreciation, depletion and amortisation (391,556) (209,948) (964,899) (644,411) Gas storage expenses (18,916) - (18,916) - Other operating expenses (112,026) (6,924) (132,754) (22,204) (1,560,970) (459,799) (3,096,112) (1,220,315) GROSS PROFIT , ,137 2,194,331 1,151,407 Administrative and other expenses (65,922) (30,642) (195,740) (64,571) Finance costs (644,027) (295,877) (1,795,463) (879,398) Gain (loss) on exchange 28,135 (500) 36,508 (373) Interest income 89,993 54, , ,909 Other income 830 1,395 8,532 2,045 Share of results of associates 8,209 3,832 22,105 20,952 Changes in fair values of derivatives (61,772) (67,956) (29,884) 10,477 PROFIT BEFORE TAX 249,029 79, , ,448 Income tax expense 4 (33,313) - (68,552) - PROFIT FOR THE PERIOD 215,716 79, , ,448 Attributable to: Equity holders of the parent 131,944 61, , ,258 Minority interests 83,772 18, , , ,716 79, , ,448 Basic earnings per share attributable to equity holders of the parent (AED) The attached notes 1 to 20 form part of these interim condensed consolidated financial statements. 2

7 INTERIM CONSOLIDATED BALANCE SHEET At (Audited) 30 September 31 December Notes AED 000 AED 000 ASSETS Non-current assets Property, plant and equipment 11 40,458,215 29,328,361 Direct finance lease receivable 12 5,909,423 - Initial spares fee 121, ,285 Advances to related parties 222, ,083 Available for sale investments 365, ,854 Investment in associates 180, ,066 Other investments ,321 1,233,456 Other assets 60,441 28,787 Intangible assets 14 4,078, ,589 51,598,847 32,193,481 Current assets Inventories 1,453, ,938 Direct finance lease receivable ,691 - Advances to related parties 47,987 14,385 Amounts due from Abu Dhabi Water and Electricity Authority (ADWEA) and other related parties 1,168,418 1,831,241 Accounts receivables, prepayments, and unbilled revenues 1,399, ,168 Bank balances and cash 7 4,959,927 16,021,167 9,318,327 19,573,899 TOTAL ASSETS 60,917,174 51,767,380 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital 4,150,000 4,150,000 Statutory reserve 196, ,061 Legal reserve 196, ,061 General reserve 750, ,000 Equity contributed capital 25,131 25,131 Retained earnings 987, ,633 Proposed dividends ,500 Translation reserve 449,236 - Cumulative changes in fair value of available for sale investments 20,183 26,253 Cumulative changes in fair value of derivatives (355,292) (318,115) 6,419,216 5,839,524 Minority interests 940,775 1,244,311 Loans from minority interest shareholders in subsidiaries 292, ,149 Loan from Abu Dhabi Water and Electricity Authority 92,640 92,640 Total equity 7,744,768 7,568,624 Non-current liabilities Interest bearing loans and borrowings 15 40,215,236 36,504,981 Islamic loans 15 3,110,313 3,056,750 Deferred tax 2,558,529 - Employees end of service benefits 14,066 1,364 Asset retirement obligations 707, ,388 Advance from related parties 22,711 23,006 Loan from related party 26,944 25,844 Other liabilities 67,174-46,722,209 39,869,333 Current liabilities Accounts payable 1,109,606 1,187,177 Interest bearing loans and borrowings 15 2,856, ,208 Islamic loans 15 57,746 53,717 Loans from minority interest shareholders in subsidiaries 17-19,770 Dividend payable 35,841 20,569 Amounts due to Abu Dhabi Water and Electricity Authority (ADWEA) and other related parties 113,958 91,312 Accruals and other liabilities 2,276,898 1,897,993 Bank overdrafts 7-232,677 6,450,197 4,329,423 Total liabilities 53,172,406 44,198,756 TOTAL EQUITY AND LIABILITIES 60,917,174 51,767,380 CHAIRMAN DIRECTOR CHIEF EXECUTIVE OFFICER The attached notes 1 to 20 form part of these interim condensed consolidated financial statements. 3

8 INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Nine month period ended Attributable to equity holders of the parent Cumulative Loan from Loan from changes in minority Abu Dhabi fair value of Cumulative interest Water Equity available changes in shareholders and Share Statutory Legal General contributed Retained Proposed Translation for sale fair value of Minority in Electricity Total capital reserve reserve reserve capital earnings dividends reserve investments derivatives Total interests subsidiaries Authority equity AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 Balance at 1 January ,150, , ,565-25,131 1,177, (390,610) 5,257, , ,880 92,640 6,744,571 Movement in changes in fair value of available for sale investments ,633-6, ,633 Movement in changes in fair value of derivatives , , , ,933 Total income for the period recognised directly in equity , , , , ,566 Profit for the period , , , ,448 Total income for the period , , , , , ,014 Other movements Repayment of loans (36,769) - (36,769) Dividends of subsidiaries (58,683) - - (58,683) Balance at 30 September ,150, , ,565-25,131 1,436, ,633 (211,375) 5,702,439 1,176, ,111 92,640 7,363,268 Balance at 1 January ,150, , , ,000 25, , ,500-26,253 (318,115) 5,839,524 1,244, ,149 92,640 7,568,624 Movement in changes in fair value (6,070) (37,177) (43,247) (69,847) - - (113,094) Foreign currency translation , , ,236 Total income and expense for the period recognised directly in equity Total income for the period ,236 (6,070) (37,177) 405,989 (69,847) ,142 Profit for the period , , , ,239 Total income and expense for the period , ,236 (6,070) (37,177) 787, , ,381 Dividends paid (207,500) (207,500) (207,500) Dividends of subsidiaries (43,553) - - (43,553) On acquisition of subsidiaries , ,737 Acquisition of minority interests (439,909) (79,458) - (519,367) Repayment of loans (20,554) - (20,554) Balance at 30 September ,150, , , ,000 25, , ,236 20,183 (355,292) 6,419, , ,137 92,640 7,744,768 The attached notes 1 to 20 form part of these interim condensed consolidated financial statements. 4

9 INTERIM CONSOLIDATED CASH FLOW STATEMENT Nine month period ended Nine month Nine month period ended period ended 30 September 30 September Notes AED 000 AED 000 OPERATING ACTIVITIES Profit for the period 587, ,448 Adjustments for: Depreciation and depletion 946, ,993 Amortisation 18,387 21,418 Net movement in employees end of service benefits 1, Interest expense 1,776, ,084 Notional interest 1,100 - Accretion expense 17,722 11,314 Share of results of associates (22,105) (20,952) Changes in fair value of derivatives 29,884 (10,477) Interest income (415,402) (134,909) 2,941,301 1,732,950 Working capital changes: Inventories (106,497) (8,993) Accounts receivables, prepayments and unbilled revenues 416,891 (991,420) Amounts due from ADWEA and other related parties 662,823 1,001,106 Amounts due to ADWEA and related parties 22,646 - Accounts payable and accruals (1,439,665) 1,083,416 Deferred tax 4 (39,700) - Other liabilities 39,715 - Cash from operations 2,497,514 2,817,059 Interest paid (1,374,348) (868,084) Net cash from operating activities 1,123,166 1,948,975 INVESTING ACTIVITIES Purchase of property, plant and equipment (1,785,159) (1,563,026) Purchase of subsidiaries, net of cash acquired (12,331,811) - Purchase of investments in associates (36,109) (114,169) Purchase of available for sale investments (230,521) (114,770) Advances to related parties, net (27,428) 189,950 Interest received 398, ,909 Advances from related party (295) - Other investments 2,212 - Other assets (31,654) - Restricted cash (198,342) - Lease rentals received 65,159 - Net cash used in investing activities (14,175,879) (1,467,106) FINANCING ACTIVITIES Interest bearing loans and borrowings 3,430, ,117 Islamic loans 57,592 1,180 Acquisition of minority interests (693,783) - Net movement in minority interests 43,737 - Dividend paid to equity holders of the parent (207,500) - Dividend paid to minority interest shareholders (28,281) (77,048) Loans from minority interest shareholders in subsidiaries (119,782) (36,769) Net cash from financing activities 2,482, ,480 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (10,570,220) 1,144,349 Net foreign exchange difference (456,685) - Cash and cash equivalents at the beginning of the period 15,788,490 2,940,077 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 7 4,761,585 4,084,426 The attached notes 1 to 20 form part of these interim condensed consolidated financial statements 5

10 1 CORPORATE INFORMATION Abu Dhabi National Energy Company PJSC ( TAQA or the Company ) was established on 21 June 2005 pursuant to the provisions of Emiri Decree number 16/2005 as a public joint stock company with Abu Dhabi Water and Electricity Authority ( ADWEA ) as its founding shareholder and 100% owner. During the period from 23 July 2005 to 1 August 2005, 24.9% of TAQA s shares were offered to the public through an Initial Public Offering (IPO) and 24.1% were offered through a private offering. ADWEA retained a 51% interest holding in the Company and accordingly, the Company is a subsidiary of ADWEA. ADWEA was established pursuant to the provisions of Law 2 of 1998, concerning the regulation of the Water and Electricity Sector. The principal activity of TAQA is to own and invest in companies engaged in power generation and water desalination and oil and gas, in addition to other investments as considered appropriate to meet its objectives. TAQA s registered head office is P O Box 55224, Abu Dhabi, United Arab Emirates. The interim condensed consolidated financial statements of TAQA and its subsidiaries (the Group ) for the period ended 30 September 2007 comprise of the financial statements of TAQA and the following entities controlled by TAQA: Country of registration Percentage holding 30 September 31 December Domestic Subsidiaries Emirates Power Company PJSC (EPC) U.A.E. 90% 90% Emirates CMS Power Company PJSC (ECPC) U.A.E. 94% 54% Gulf Power Company PJSC (GPC) U.A.E. 90% 90% Gulf Total Tractebel Power Company PJSC (GTTPC) U.A.E. 54% 54% Arabian United Power Company PJSC (AUPC) U.A.E. 90% 90% Arabian Power Company PJSC (APC) U.A.E. 54% 54% Al Shuweihat Power Company PJSC (SPC) U.A.E. 90% 90% Shuweihat CMS International Power Company PJSC (SCIPCO) U.A.E. 74% 54% Al Taweelah United Power Company (TUPC) U.A.E. 90% 90% Taweelah Asia Power Company PJSC (TAPCO) U.A.E. 54% 54% Union Power Holding Company PJSC (UPC) U.A.E. 90% 90% Emirates Semb Corp Water and Power Company PJSC (ESWPC) U.A.E. 54% 54% Taweelah Shared Facilities Company LLC (TSFC) U.A.E. 48% 48% Foreign Subsidiaries TAQA New World, Inc. Delaware, U.S.A 100% 100% AGLAUROS, Inc. Delaware, U.S.A 100% 100% TAQA Bratani Limited U.K. 100% 100% TAQA Bratani LNS Limited U.K. 100% - TAQA Europa B.V. Netherlands 100% 100% TAQA Energy B.V. Netherlands 100% - TAQA Cyprus Cyprus 100% - TAQA Luxembourg S.A.R.L. Luxembourg 100% - ABB Power Investments (India) B.V. Netherlands 100% - AB Cythere 61 Sweden 100% - AB Cythere 63 Sweden 100% - Tre Kronor Investment AB Sweden 100% - TAQA North Ltd Canada 100% - 6

11 1 CORPORATE INFORMATION continued Country of registration Percentage holding 30 September 31 December Foreign Subsidiaries continued TAQA Generation LLC Michigan, U.S.A 100% - TAQA Generation International LLC Michigan, U.S.A 100% - TAQA Generation Investment Company I Cayman Islands 100% - TAQA Generation Investment Company IV Cayman Islands 100% - TAQA Generation Investment Company II Cayman Islands 100% - CMS Generation Jorf Lasfar I Limited Duration Company Cayman Islands 100% - CMS Generation Luxembourg S.A.R.L. Luxembourg 100% - CMS Generation Netherlands B.V. Netherlands 100% - Jorf Lasfar Power Energy Aktiebolag Sweden 100% - Jorf Lasfar EnergiAktiebolag Sweden 100% - Jorf Lasfar Energy Company, SCA Morocco 100% - Jorf Lasfar Handelsbolag Sweden 100% - CMS Generation Jorf Lasfar II Limited Duration Company Cayman Islands 100% - Jorf Lasfar I HB Sweden 100% - Jorf Lasfar Power Energy HB Sweden 100% - TAQA Generation Investment Company VI Cayman Islands 100% - TAQA Takoradi Investment Company Cayman Islands 100% - TAQA Takoradi Investment Company II Cayman Islands 100% - Takoradi International Company Cayman Islands 90% - Shuweihat O & M General Partner Company Cayman Islands 100% - Shuweihat General Partner Company Cayman Islands 100% - Shuweihat Limited Partnership Cayman Islands 100% - TAQA Generation Investment Company VII Cayman Islands 100% - CMS Jubail Investment Company I Cayman Islands 100% - Taweelah A2 Operating LLC Michigan, U.S.A 100% - CMS Generation Taweelah Limited Cayman Islands 100% - CMS Energy UK Limited U.K. 100% - TAQA Generation Investment Company III Cayman Islands 100% - CMS Generation Neyveli Ltd. Mauritius 100% - ST-CMS Electric Company Pvt. Ltd. India 100% - TAQA Generation International Operating Company Cayman Islands 100% - CMS (India) Operations & Maintenance Company Private Limited India 100% - CMS Generation UK Operating Private Limited U.K. 100% - TAQA Generation Jorf Lasfar III Limited Duration Company Cayman Islands 100% - Jorf Lasfar Aktiebolag Sweden 100% - Jorf Lasfar Operations Handelsbolag Sweden 100% - CMS Morocco Operating Co., S.C.A. Morocco 100% - In addition, the Group has a 50% interest in Shuweihat O&M Limited Partnership, a jointly controlled entity engaged in providing operation and management services in the utility business. Undivided interests in oil and gas joint ventures, facilities and gas storage plants are consolidated on a proportionate basis. The interim condensed consolidated financial statements of the Group were authorised for issued by the Board of Directors on 30 October

12 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION The interim condensed consolidated financial statements of the Group are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The interim condensed consolidated financial statements do not include all information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group s annual consolidated financial statements for the year ended 31 December In addition, results for the nine months ended 30 September 2007 are not necessarily indicative of the results that may be expected for the financial year ending 31 December ACCOUNTING POLICIES The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements for the year ended 31 December 2006, except for the adoption of the following policies noted below. New standards and Interpretations which became effective 1 January 2007 The adoption of these standards did not have any effect on the financial position or performance of the Group. Amendments to IAS 1 Capital Disclosures Amendments to IAS 1 Presentation of Financial Statements were issued by the IASB as Capital Disclosures in August They are required to be applied for periods beginning on or after 1 January These amendments require disclosure of information enabling evaluation of the Group s objectives, policies and processes for managing capital. IFRS 7 Financial Instruments: Disclosures IFRS 7 Financial Instruments: Disclosures was issued by the IASB in August 2005, becoming effective for periods beginning on or after 1 January The new standard requires additional disclosure of the significance of financial instruments for the Group s financial position and performance and information about exposure to risks arising from financial instruments. IFRIC 10 Interim Financial Reporting and Impairment The Group adopted IFRIC Interpretation 10 as of 1 January 2007, which requires that an entity must not reverse an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. The following additional accounting policies were applied as a result of acquiring new subsidiaries in Revenue recognition Oil and Gas Revenue from the sale of crude oil and natural gas is recognised when significant risks and rewards of ownership are transferred to the buyer and the amount of revenue and the costs of the transaction can be measured reliably. Gas Storage The income from gas storage is recognised when the service is provided and accepted by customers. 8

13 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Revenue recognition continued Water and Electricity In addition to the long term Power and Water Purchase Agreements (PWPA) entered into by the Group s domestic subsidiaries with the offtaker, Abu Dhabi Water and Electricity Company (ADWEC) a wholly owned subsidiary of ADWEA, a number of the foreign subsidiaries acquired during 2007 have Power Purchase Agreements (PPA) with offtakers to sell their output of energy. Under these PPA arrangements the Group s foreign subsidiaries receive payment for the provision of electrical capacity (whether or not the offtaker requests the electrical output) and for the variable revenue towards costs of production (energy payments). The revenue recognition of the Group is as follows: (i) (ii) (iii) Where the Group determines that the PWPA/PPA contains a finance lease, capacity payments are recognised as finance income using a rate of return specific to the plant to give a constant periodic rate of return on the net investment in each period. Where the Group determines that the PWPA/PPA contains an operating lease, capacity payments are recognized as operating lease rentals, on a systematic basis and for those payments which are not included within minimum lease payments, as revenue in accordance with the contractual terms of the PWPA/PPA, to the extent that capacity has been made available to the Offtaker during the period. Energy and water payments are recognised as revenue when the contracted power and water is delivered to the Offtaker. Income tax Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date in countries where the subsidiaries and joint ventures operate. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. 9

14 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Foreign currency translation The consolidated financial statements are presented in UAE Dirhams (AED), which is the Group s functional and presentation currency. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity and foreign currency monetary items that form part of the Company s net investment in a foreign operation between the parent and its subsidiaries. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in equity. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate. The assets and liabilities of foreign operations are translated into AED at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation, depletion and any impairment in value. Depreciation is calculated on a straight line basis over the estimated useful lives of assets, except for oil and gas properties. The successful efforts method of accounting is used for oil and gas explorations costs. Under this method, initial acquisition costs of oil and gas properties and costs of drilling and equipping exploration wells are capitalised when incurred and, if subsequently determined to be unsuccessful, are charged to dry hole expense. All other exploration expenses, including geological and geophysical costs and annual lease rentals, are charged to exploration expense when incurred. Capitalised costs of proved oil and gas properties in property, plant and equipment are depleted using the unit-ofproduction method based on estimated proved plus probable ( 2P ) oil and gas reserves. Changes in reserves are accounted for prospectively. Interest in a joint venture The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest. The Group recognises its interest in the joint venture using proportionate consolidation. Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: (a) (b) (c) (d) There is a change in contractual terms, other than a renewal or extension of the arrangement; A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term; There is a change in the determination of whether fulfilment is dependant on a specified asset; or There is a substantial change to the asset. 10

15 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Leases continued Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios a), c) or d) and at the date of renewal or extension period for scenario b). Group as a lessee Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement or capitalised in accordance with International Accounting Standard No 23, with other borrowing costs. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. Group as a lessor Finance lease Where the Group determines the PWPA/PPA to contain a finance lease and the Group transferred substantially all the risks and benefits of ownership of the asset through its contractual arrangements to the offtaker, the arrangements are considered a finance lease. The amounts due from the lessee are recorded in the balance sheet as financial assets (financial lease receivable) and is carried at the amount of the net investment in the lease after making provision for bad and doubtful debts. Operating lease Leases where the Group retain substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned. For plants covered by operating leases, these are capitalized as property, plant and equipment and depreciated over its economic life. Abandonment and site restoration Where required under existing production and licensing contracts, the Group will record the estimated costs of future abandonment and site restoration of oil and gas properties, which will be added on to the carrying value of the oil and gas properties. The abandonment and site restoration costs initially recorded will be depleted using the unit-ofproduction method based on estimated proved developed oil and gas reserves. Subsequent revisions to abandonment and site restoration costs are considered as a change in estimates and will be accounted for on a prospective basis. Intangible assets Intangible assets are stated at cost, less impairment losses. An intangible asset acquired as a part of a business combination is recognised separately from goodwill if the asset is separable or arises from contractual or legal rights and its fair value can be measured reliably. The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. When development is internally approved, the relevant expenditure is transferred to property, plant and equipment. If no future activity is planned, the remaining balance is written off. 11

16 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Company s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Company are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and is not larger than a segment based on either the Group s primary or secondary reporting format determined in accordance with IAS 14 Segment Reporting. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash- generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cashgenerating units) is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. 3 REVENUE FROM WATER AND ELECTRICITY 12 Nine months Nine months ended ended 30 September 30 September AED 000 AED 000 Operating lease revenue 2,343,095 2,132,611 Finance lease revenue 339,946 - Energy payments and other related revenue 764, ,111 3,447,491 2,371,722 The domestic subsidiaries namely; ECPC, GTTPC, APC, SCIPCO, TAPCO and ESWPC have entered into a power and water purchase agreement (PWPA) with Abu Dhabi Water Electricity Company (ADWEC) a wholly owned subsidiary of ADWEA. Under the PWPA, the domestic subsidiaries undertake to make available and ADWEC undertakes to purchase the available net capacity of the plant for periods ranging between 20 years to 23 years, in accordance with various agreed terms and conditions as specified in the PWPA. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plants will be retained by the domestic subsidiaries at the end of the PWPA term. The foreign subsidiaries namely Jorf Lasfar Energy Company SCA (Jorf Lasfar), ST-CMS Electric Company Pvt LTD (Neyveli) and Takoradi International Company (Takoradi) have entered into a power purchase agreement (PPA) with an offtaker in the country where they are operating. Under the PPA the foreign subsidiaries undertake to make available and the offtakers undertake to purchase the available net capacity of the plant for a period of time in accordance with various agreed terms and conditions as specified in the PPA as follows:

17 3 REVENUE FROM WATER AND ELECTRICITY continued Jorf Lasfar: The subsidiary has the right of possession for the site and the plant units for a period of 30 years ending in September After the 30 years period, the ownership of the site and the plants will be transferred to the offtaker. Neyveli: The subsidiary has a 30 year PPA with the offtaker ending in December On the expiry date of the PPA, the offtaker has the option to acquire the plant at a price equal to 50% of the terminal value as defined in the PPA. Takoradi: The subsidiary has a 25 year PPA with the offtaker ending in March On expiry date of the PPA, the plant is transferred to the offtaker at a nominal amount. 4 INCOME TAX Nine months Nine months ended ended 30 September 30 September AED 000 AED 000 Current income tax: Current income tax (108,252) - Deferred income tax Relating to origination and reversal of temporary differences 39,700 - (68,552) - 5 BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for the effects of dilutive instruments. The following reflects the income and shares data used in the earnings per share computations: Three months Three months Nine months Nine months ended ended ended ended 30 September 30 September 30 September 30 September Profit for the period attributable to equity holders of the parent (AED 000) 131,944 61, , ,258 Weighted average number of ordinary shares issued ( 000) 4,150,000 4,150,000 4,150,000 4,150,000 Basic earnings per share (AED) No figure for diluted earnings per share has been presented as the Company has not issued any instruments which would have an impact on earnings per share when exercised. 13

18 6 SEASONALITY OF OPERATIONS - Due to seasonal nature of power and water generation subsidiaries in United Arab Emirates, higher revenues and operating profits are usually expected to increase in the summer period i.e. second and third quarters of the year compared to first and fourth quarters of the year due to high consumption of electricity. Independent power subsidiaries in other countries are not materially affected by seasonal changes and are generally performing to plan. - Due to the seasonal nature of TAQA Energy BV operations which is engaged in oil and gas, higher revenues and operating profits are usually expected in the winter periods, i.e. the first and fourth quarters of the year compared to the second and third quarters of the year, due to the high demand on gas in Europe. Taqa North which is also engaged in oil and gas is not materially affected by seasonal changes and is generally performing to plan. 7 CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the interim consolidated cash flow statement comprise the following balance sheet amounts: 30 September 30 September AED 000 AED 000 Bank balances and cash 4,959,927 4,198,765 Bank overdrafts - (114,339) 4,959,927 4,084,426 Less: restricted cash (note 13) (198,342) - 4,761,585 4,084,426 The Group has unsecured revolving credit facility of US $1 billion (AED 3,673 million). An amount of AED 2,020 million has been utilised as of 30 September 2007 and was treated as short term borrowings and included within the balance of interest bearing loans and borrowings in the interim consolidated balance sheet. Significant non-cash transactions, which have been excluded from the cash flow statement are as follows: Nine month Nine month period ended period ended 30 September 30 September AED 000 AED 000 Movement in cumulative changes in fair value of available for sale investments (6,070) 6,633 Movement in cumulative changes in fair value of derivatives accounts payable and accruals (107,079) (208,260) Movement in cumulative changes in fair value of derivatives prepayment and other assets - 134,150 Interest receivable 17, Interest payable 629,218-14

19 7 CASH AND CASH EQUIVALENTS continued Acquisitions of subsidiaries (note 8) Nine month Nine month period ended period ended 30 September 30 September AED 000 AED 000 Property, plant and equipment 9,481,746 - Finance lease receivable 6,161,296 - Other investments Inventory 401,087 - Accounts receivable, prepayments and unbilled revenues 1,038,172 - Goodwill 2,678,525 - Abandonment provisions (404,873) - Accounts payables and accruals (1,201,798) - Interest bearing loans and borrowings (2,309,685) - Deferred tax (2,445,174) - Other liabilities (27,459) - Employees end of service benefits (11,379) Cash outflow at acquisition 13,360,734 - Presented in cash flow statement as follows: Final purchase payment made on acquisition date 12,331,811 - Advance paid in prior year included within other investments 1,028,923-8 BUSINESS COMBINATIONS During the period TAQA has made the following acquisitions: 13,360,734 - (i) (ii) TAQA on behalf of its wholly-owned subsidiary TAQA Europa BV signed a Share Purchase Agreement ( SPA ) with AMOCO Netherlands Petroleum Company and BP Corporation North America Inc (the Seller ) for the purchase of the entire share capital of BP Nederland Energie B.V. with an economic effective date from 1 July 2006 ( Economic date ). The completion was achieved on 31 January 2007 (the Completion date ) and accordingly as of that date BP Nederland Energie B.V. became a wholly owned subsidiary of TAQA. TAQA signed a Share Purchase Agreement (SPA) with each of CMS Enterprises Company (a subsidiary of CMS Energy, a company incorporated in the United States) and ABB Group ( referred to as: Acquisition transaction - CMS and ABB). The businesses included in the sale deal with CMS Enterprises are CMS Generation ownership interests in the Jorf Lasfar Energy Company in Morocco (50% interest), the ST-CMS Electric Company in Neyveli, India (50% interest), the Jubail Energy Company in the Kingdom of Saudi Arabia (25% interest), the Takoradi International Company in Ghana (90% interest), Emirates CMS Power Company in U.A.E. (an existing subsidiary-40% interest), Shuweihat CMS International Power Company in U.A.E (an existing subsidiary-20% interest) and the related O&M companies and the special purpose companies set up to own the interest of CMS Generation Company in these companies. The businesses included in the ABB Group sale deal are the ABB Group interest in Jorf Lasfar Energy Company in Morocco (50% interest) and ST CMS Electric Company in Neyveli, India (50% interest) and the special purpose companies set up to own the interest of ABB Group in these companies. The two deals were completed on 2 May 2007 and were structured to be completed simultaneously. 15

20 8 BUSINESS COMBINATIONS continued (iii) TAQA signed a Share Purchase Agreement ( SPA ) with POGO Producing Company (the Seller ) for the sale of Northrock Resources Ltd (Northrock) entire share capital to TAQA for an amount of US$ 2,000 million with an economic effective date on 1 January 2007 ( Economic date ). It was agreed that the shares will be transferred to TAQA on completion date which is the same date when TAQA obtains control over the new assets and has the power to govern the financial and operating polices of Northrock as per the terms of the SPA. The completion has been achieved on 14 August 2007 (the Completion date ) and effective that date, Northrock and the special purpose company formed for the purpose of acquiring Northrock were amalgamated to form TAQA North. (i) Acquisition of BP Nederland Energie B.V The fair value of the identifiable assets and liabilities of BP Netherland Energie B.V. as at the date of acquisition were: Fair value Previous recognised carrying on acquisition value (Unaudited) (Unaudited) AED 000 AED 000 Property, plant and equipment 2,201, ,739 Investments Trade receivables 107, ,778 Other receivables, deposits and prepayments 69,304 69,304 Inventory 4,522 4,522 Bank balances and cash 380, ,083 2,763,346 1,045,702 Trade and other payables (140,150) (140,150) Abandonment provision (234,206) (234,206) Deferred tax (641,920) - (1,016,276) (374,356) Net assets acquired 1,747, ,346 Goodwill arising on acquisition * 900,116 Total acquisition cost 2,647,186 The total acquisition cost of AED 2,647 million was paid in cash. AED 000 (Unaudited) Cash outflow on acquisition: Net cash acquired with the subsidiary 380,083 Acquisition cost paid in cash (2,647,186) Net cash outflow (2,267,103) * Balance of goodwill as at the date of acquisition 900,116 Exchange difference 82,662 Balance of goodwill as at 30 September ,778 The fair value is based on a provisional purchase price allocation undertaken at the time of acquisition. The allocation will be finalised at a later date. 16

21 8 BUSINESS COMBINATIONS continued (i) Acquisition of BP Nederland Energie B.V continued The goodwill recognised above is attributable to the expected synergies from combining the assets and activities of BP Netherland Energie BV with those of the Group as well as cash flows from the development of oil fields and gas storage facilities. From the date of acquisition, BP Netherland Energie B.V has contributed AED 30.7 million to the profit of the Group. (ii) Acquisition transaction - CMS and ABB The fair value of the identifiable assets and liabilities of the entities acquired from CMS Generation Company and ABB Group excluding Jubail Energy Company in the Kingdom of Saudi Arabia (25% interest), Emirates CMS Power Company in U.A.E. (an existing subsidiary-40% interest) and Shuweihat CMS International Power Company in U.A.E (an existing subsidiary-20% interest), as at the date of acquisition were: Fair value Previous recognised carrying on acquisition value (unaudited) (unaudited) AED 000 AED 000 Net investment in lease 6,161,296 5,159,077 Property, plant and equipment 166, ,108 Accounts receivables 600, ,547 Inventory 301, ,514 Bank balances and cash 520, ,155 7,750,259 6,677,401 Term loans (2,309,685) (2,303,481) Trade and other payables (583,400) (653,862) Employees end of service benefits (11,379) (11,379) Deferred tax (486,150) (71,594) (3,390,614) (3,040,316) Net asset acquired 4,359,645 3,637,085 Goodwill arising on acquisition 17,994 Total acquisition cost 4,377,639 The total acquisition cost of AED 4,378 million was paid in cash. AED 000 (Unaudited) Cash outflow on acquisition: Net cash acquired with the subsidiary 520,155 Acquisition cost paid in cash (4,377,639) Net cash outflow (3,857,484) The fair value is based on a provisional purchase price allocation undertaken at the time of acquisition. The allocation will be finalised at a later date.the goodwill recognised above is attributable to the expected synergies from combining the assets and activities of the entities acquired with those of the Group. From the date of acquisition, the entities acquired have contributed AED 234 million to the profit of the Group. 17

22 8 BUSINESS COMBINATIONS continued (iii) Acquisition of TAQA North (Formerly known as Northrock Resources Limited) The fair value of identifiable assets, liabilities of TAQA North as at the date of acquisition were: Fair value Previous recognition carrying acquisition value (unaudited) (unaudited) AED 000 AED 000 Property, plant and equipment 7,113,810 8,730,869 Intangible assets - 2,908,880 Inventories 94,596 94,596 Accounts receivable and prepayment 260, ,402 Bank balances and cash 103, ,234 7,572,444 12,003,981 Accounts payable (478,248) (433,651) Assets retirement obligation (170,667) (175,646) Deferred tax (1,317,104) (2,528,082) Other liabilities (27,459) (12,062) (1,993,478) (3,149,441) Net asset acquired 5,578,966 8,854,540 Goodwill arising on acquisition* 1,760,415 Total acquisition cost 7,339,381 The total acquisition cost of AED 7,339 million was paid in cash. AED 000 (Unaudited) Cash outflow on acquisition: Net cash acquired with the subsidiary 103,234 Acquisition cost paid in cash (7,339,381) Net cash outflow (7,236,147) * Balance of goodwill as at the date of acquisition 1,760,415 Exchange difference 92,129 Balance of goodwill as at 30 September ,852,544 The fair value is based on a provisional purchase price allocation undertaken at the time of acquisition. The allocation will be finalised at a later date. The goodwill recognised above is attributable to the expected synergies from combining the assets and activities of Northrock Resources Limited with those of the Group as well as cash flows from the development of oil fields and gas storage facilities. From the date of acquisition, TAQA North has contributed AED 44.1 million to the profit of the Group. If all of the above acquisitions had taken place at the beginning of the year, the profit of the Group would have been AED 1,148 million and the revenue from continuing operations would have been AED 7,688 million. 18

23 9 ACQUISITION OF MINORITY INTERESTS As fully explained under note 8, the Group has acquired from CMS Enterprises Company their 40% shareholding interest in Emirates CMS Power Company in U.A.E. (an existing subsidiary) and their 20% shareholding interest in Shuweihat CMS International Power Company in U.A.E (an existing subsidiary). The Group accounting policy for such acquisition is using the parent extension method whereby the difference between the consideration and the book value of the share of the net assets acquired is recognised as goodwill. AED 000 Book value of the share of the net assets acquired 439,909 Goodwill on acquisition 253,874 Consideration paid 693, SEGMENTAL ANALYSIS Business segments For management purposes the Group is organised into two major business segments: Power and Water Generation Segment This segment is engaged in generation of electricity and production of desalinated water for supply into the Abu Dhabi grid. In addition, this segment is engaged in generation of electricity in Morocco, India and Ghana. Oil and Gas Segment This segment is engaged in Upstream, and Midstream oil and gas activities in the Netherlands and Canada. The following table presents revenue, results and certain asset information regarding the Company s business segments for the nine month period ended 30 September Power and water Oil generation and gas Total AED 000 AED 000 AED 000 Nine months ended Results Revenue 4,722, ,663 5,290,443 Gross profit 2,044, ,611 2,194,331 Finance costs (1,795,463) Finance income 415,402 Others (158,479) Profit before tax and minority interest 655,791 Other segment information 30 September 2007 Segment assets 44,041,942 15,169,483 59,211,425 Unallocated corporate assets 1,705,749 Total consolidated assets 60,917,174 19