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 31 MARCH 2007 (UNAUDITED) E

2 Abu Dhabi National Energy Company PJSC ( TAQA ) REPORT OF THE BOARD OF DIRECTORS 31 MARCH 2007 (UNAUDITED) E

3 ABU DHABI NATIONAL ENERGY COMPANY ( TAQA ) DIRECTORS REPORT FOR THE QUARTER ENDED 31 MARCH 2007 The Abu Dhabi National Energy Company ( TAQA ) Directors have pleasure in submitting their report together with the interim condensed consolidated financial statements for the period from 1 January 2007 to 31 March TAQA was established pursuant to the provisions of Emiri Decree (16) of 2005 as a public joint stock company with Abu Dhabi Water and Electricity Authority ( ADWEA ) as its founding shareholder and a 51% interest holder. 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 Oil and Gas, power generation, water, energy and infrastructure sectors, in addition to other investments as considered appropriate to meet its objectives. During the quarter ended 31 March, 2007 the Company completed the purchase of BP Nederland Energie B.V. (renamed as TAQA Energy B.V. after the acquisition) through its wholly-owned subsidiary TAQA Europa B.V. TAQA accounted for the acquisition using the purchase method under IFRS 3. The results of operation of TAQA Energy B.V. (after making fair value adjustments for the acquisition) for the period from 31 January 2007 (the acquisition date) to 31 March 2007 of AED 49 million has been included in TAQA s financial statements for the quarter. TAQA continued to have six subsidiaries operating in the U.A.E. with an interest holding of 90% each, with the remaining 10% owned by ADWEA. Accordingly, ADWEA is considered the minority interest in these consolidated financial statements in addition to being the Holding Company of TAQA. The six subsidiaries are: Emirates Power Company PJSC, Gulf Power Company PJSC, Shuweihat Power Company PJSC, Arabian United Power Company PJSC, Taweelah United Power Company PJSC and Union Power Holding Company. Each of the six subsidiaries has 60% interest holding in a operating subsidiary engaged in the generation of electricity and the production of desalinated water for supply into the Abu Dhabi grid. Financial Results: The total revenues for the period from 1 January 2007 to 31 March 2007 were AED billion. The profit for the period was AED 64 million. The Basic Earnings per Share was AED The Company s total assets as of 31 March 2007 was AED 53 billion. On behalf of the Board

4 Abu Dhabi National Energy Company PJSC ( TAQA ) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2007 (UNAUDITED) e

5 INTERIM CONSOLIDATED INCOME STATEMENT Three month period ended Three month Three month period ended period ended 31 March 31 March Notes AED 000 AED 000 Revenues Sale of electricity and water 878, ,499 Revenue from oil and gas 76,118 - Supplemental income back up fuel 21,969 - Other operating revenue gas storage 71, ,048, ,499 Cost of sales Staff costs (8,982) (7,522) Repairs, maintenance and consumables used (204,483) (147,967) Fuel expenses (23,121) - Depreciation and amortisation (262,479) (208,405) (499,065) (363,894) GROSS PROFIT 7 549, ,605 Administrative and other expenses (53,606) (16,559) Finance costs (555,040) (280,398) Gain on exchange Interest income 183,817 33,031 Other income 3, Share of results of associate 6,868 - Changes in fair values of derivatives (10,862) 31,619 PROFIT BEFORE TAX 124, ,217 Income tax expense 3 (31,154) - PROFIT FOR THE PERIOD 93, ,217 Attributable to: Equity holders of the parent 63,616 68,038 Minority interests 30,099 35,179 PROFIT FOR THE PERIOD 93, ,217 Basic earnings per share attributable to equity holders of the parent (AED) The attached notes 1 to 13 form part of these interim condensed consolidated financial statements. 2

6 INTERIM CONSOLIDATED BALANCE SHEET At (Audited) 31 March 31 December Notes AED 000 AED 000 ASSETS Non-current assets Property, plant and equipment 10 31,785,971 29,328,361 Initial spares fee 121, ,285 Advances to related parties 227, ,083 Available for sale investments 207, ,854 Investment in an associate 128, ,066 Other investments 870,592 1,233,456 Other assets ,787 Intangible assets 11 2,078, ,589 35,419,356 32,193,481 Current assets Inventories 946, ,938 Advances to related parties 14,385 14,385 Amounts due from Abu Dhabi Water and Electricity Authority (ADWEA) and other related parties 1,019,297 1,831,241 Accounts receivables and prepayments 1,442, ,168 Bank balances and cash 13,863,401 16,021,167 17,286,894 19,573,899 TOTAL ASSETS 52,706,250 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 670, ,633 Proposed dividends 207, ,500 Translation reserve Cumulative changes in fair value of available for sale investments 17,229 26,253 Cumulative changes in fair value of derivatives (323,584) (318,115) 5,888,831 5,839,524 Minority interests 1,142,145 1,244,311 Loans from minority interest shareholders in controlled subsidiaries 371, ,149 Loan from Abu Dhabi Water and Electricity Authority 92,640 92,640 Total equity 7,495,197 7,568,624 Non-current liabilities Interest bearing loans and borrowings 37,243,528 36,504,981 Islamic loans 3,097,417 3,056,750 Deferred tax 654,114 - Employees end of service benefits 1,461 1,364 Assets retirement obligations 504, ,388 Advance from related parties 22,711 23,006 Loan from related party 26,228 25,844 41,549,532 39,869,333 Current liabilities Accounts payable 424,111 1,187,177 Interest bearing loans and borrowings 779, ,208 Islamic loans 53,905 53,717 Deferred tax 16,234 - Loans from minority interest shareholders in controlled subsidiaries 19,761 19,770 Dividend payable - 20,569 Amounts due to Abu Dhabi Water and Electricity Authority (ADWEA) and other related parties 104,908 91,312 Accruals and other liabilities 2,262,920 1,897,993 Bank overdraft - 232,677 3,661,521 4,329,423 Total liabilities 45,211,053 44,198,756 TOTAL EQUITY AND LIABILITIES 52,706,250 51,767,380 CHAIRMAN DIRECTOR CHEIF EXECUTIVE OFFICER The attached notes 1 to 13 form part of these interim condensed consolidated financial statements. 3

7 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Three 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 controlled 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 31 December ,150, , ,565-25,131 1,177, (390,610) 5,257, , ,880 92,640 6,744,571 Movement in changes in fair values , , , ,326 Total income for the period recognised directly in equity , , , ,326 Profit for the period , ,038 35, ,217 Total income for the period , , , , ,543 Repayment of loans (17,809) - (17,809) Balance at 31 March 2006 (unaudited) 4,150, , ,565-25,131 1,245, (111,478) 5,604,483 1,221, ,071 92,640 7,329,305 Balance at 31 December ,150, , , ,000 25, , ,500-26,253 (318,115) 5,839,524 1,244, ,149 92,640 7,568,624 Movement in changes in fair values (9,024) (5,469) (14,493) (4,669) - - (19,162) Total income for the period recognised directly in equity (9,024) (5,469) (14,493) (4,669) - - (19,162) Exchange differences arising on translation of overseas operation Profit for the period , ,616 30, ,715 Total income for the period , (9,024) (5,469) 49,307 25, ,737 Share of distributions (17,400) - - (17,400) Reduction in share capital (110,196) - - (110,196) Repayment of loans (20,568) - (20,568) Balance at 31 March 2007 (unaudited) 4,150, , , ,000 25, , , ,229 (323,584) 5,888,831 1,142, ,581 92,640 7,495,197 The attached notes 1 to 13 form part of these interim condensed consolidated financial statements. 4

8 INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT Three month period ended Three month Three month period ended period ended 31 March 31 March Notes AED 000 AED 000 OPERATING ACTIVITIES Profit for the period 93, ,217 Adjustments for: Depreciation 252, ,368 Amortisation 9,658 7,037 Net movement in employees end of service benefit Interest expense 550, ,998 Notional interest Accretion expense 4,462 - Share of results of associate (6,869) - Changes in fair value of derivatives 10,862 (31,619) Interest income (183,817) (33,031) 731, ,980 Working capital changes Inventories (782) 1,184 Accounts receivables and prepayments 7,083 (139,147) Amount due from Abu Dhabi Water and Electricity Authority 811,944 1,001,106 Amounts due from related parties - 55,744 Amounts due to ADWEA and related parties 13,596 (107,534) Accounts payable and accruals (515,740) 314,167 Deferred tax 3 7,975 - Cash from operations 1,055,583 1,660,500 Interest paid (550,194) (287,998) Net cash (used in) from operating activities 505,389 1,372,502 INVESTING ACTIVITIES Purchase of property, plant and equipment (612,090) (444,318) Purchase of subsidiary-remaining proceeds on acquisition date net of cash acquired (1,236,375) - Purchase of investment in an associate - (114,171) Purchase of available for sale investments (75,189) - Advance to related parties 2,011 4,334 Advances from related party (295) - Interest income 183,817 33,031 Other investment (666,059) - Deposit Receivable (522,281) - Net cash used in investing activities (2,926,461) (521,124) FINANCING ACTIVITIES Interest bearing loans and borrowings 609, ,800 Islamic loans 40,855 - Reduction of share capital (110,196) - Dividend paid (37,969) (18,365) Loans from minority interest shareholders in controlled subsidiaries (20,568) 52,191 Net cash from financing activities 481, ,626 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,939,816) 1,160,004 Net foreign exchange difference 14,727 - 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 5 13,863,401 4,100,081 5

9 INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT continued Three month period ended Significant non-cash transactions, which have been excluded from the statement of cash flows, are as follows: Three month Three month period ended period ended 31 March 31 March Notes AED 000 AED 000 Movement in cumulative changes in fair value of available-for-sale investments 9,024 - Movement in cumulative changes in fair value of derivatives 21, ,326 Asset retirement obligations and abandonment provision 627 3,770 Acquisition of subsidiary (Note 6) Property Plant and Equipment 2,034,786 - Accounts receivable and prepayments 181,604 - Intangible assets 1,064,908 - Other Assets Abandonment Provisions (234,206) - Accounts payables and accruals (140,150) - Deferred Tax (641,920) - Cash outflow at acquisition 6 2,265,298 - Presented in cash flow statement as follows: Remaining Proceeds paid on acquisition date (1,236,375) - Advance paid as of 31 December 2006 included within other investments (1,028,923) - The attached notes 1 to 13 form part of these interim condensed consolidated financial statements. 6

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, oil and gas and metal, 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 the TAQA and its subsidiaries ( the Group ) for the period ended 31 March 2007 comprise of the financial statements of TAQA and the following entities controlled by the TAQA: Domestic Subsidiaries Country of incorporation Percentage holding 31 March 31 December Emirates Power Company PJSC (EPC) U.A.E. 90% 90% Emirates CMS Power Company PJSC (ECPC) U.A.E. 54% 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. 54% 54% Taweelah United Power Company (TUPC) U.A.E. 90% 90% Taweelah Asia Power Company PJSC (TAPCO) U.A.E. 54% 54% Union power Company PJSC (UPC) U.A.E. 90% - Emirates Semb Corp Water and Power Company PJSC (ESWPC) U.A.E. 54% - Taweelah Shared Facilities (TSFC) U.A.E. 48% 48% Foreign Subsidiaries TAQA New World -Delaware U.S. 100% 100% AGLAUROS Inc.-Delaware U.S. 100% 100% TAQA Bratani Limited U.K. 100% 100% TAQA Europa B.V. Netherlands 100% 100% TAQA Energy BV Netherlands 100% - TAQA Cyprus Cyprus 100% - TAQA Luxembourg Luxembourg 100% - The interim condensed consolidated financial of the Group were authorised for issued by the Board of Directors on 13 May

11 1 CORPORATE INFORMATION continued Business combination The acquisition of BP Netherland Energie B.V. on 31 January 2007 has been accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired, liabilities and contingent liabilities assumed at the date of acquisition. TAQA changed the acquired entity name to TAQA Energy B.V. The interim condensed consolidated financial statements include the results of TAQA Energy B.V. from its acquisition date. 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION The interim condensed consolidated financial statements of the Company 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 financial statements and should be read in conjunction with the Group s annual financial statements for the year ended 31 December In addition, results for the three month ended 31 March 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 financial statements are consistent with those followed in the preparation of the annual 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 When effective, these amendments will 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 will require 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. 8

12 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Accounting policies applied as a result of the business combination The following additional accounting policies were applied as a result of acquiring new subsidiary in Revenue recognition 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. The income from gas storage is accounted for in accordance with the invoicing schedule. 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 in countries where the subsidiaries and joint ventures operate by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the 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 Company 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. Foreign currency translation Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. 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 consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the income statement. 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 subsidiaries are translated into UAE Dirhams at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average exchange rates for the year. The exchange differences arising on translation are taken directly to a separate component of equity. 9

13 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Property, plant and equipment Property, plant and equipment is 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 and development 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 developed oil reserves. Changes in reserves are accounted for prospectively. 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-of-production 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 recognized 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. 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 Company 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 Company at which the goodwill is monitored for internal management purposes; and is not larger than a segment based on either the Company s primary or secondary reporting format determined in accordance with IAS 14 Segment Reporting. 10

14 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES continued 2.2 ACCOUNTING POLICIES continued Goodwill continued Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cashgenerating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating 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 INCOME TAX AED 000 AED 000 Current income tax: Current income tax 23,179 - Deferred income tax Relating to origination and reversal of temporary differences 7,975-31,154-4 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 Group 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 Group 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 month Three month ended ended 31 March 31 March Profit for the period attributable to equity holders of the parent (AED 000) 63,616 68,038 Weighted average number of ordinary shares issued ( 000) 4,150,000 4,150,000 Basic earnings per share (AED) No figure for diluted earnings per share has been presented as the Group has not issued any instruments which would have an impact on earnings per share when exercised. 11

15 5 CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the interim condensed consolidated cash flow statement comprise the following balance sheet amounts: 31 March 31 March AED 000 AED 000 Bank balances and cash 13,863,401 4,109,290 Bank overdrafts - (9,209) 13,863,401 4,100,081 6 BUSINESS COMBINATION Acquisition of BP Netherland Energie B.V. In November 2006, 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 sale of BP Nederland Energie B.V. entire share capital to TAQA Europa BV with an economic effective date from 1 July 2006 ( 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 BP Nederland Energie B.V. as per the terms of the SPA. The completion was achieved on 31 January 2007 (the Completion and acquisition date ) and accordingly as of that date BP Nederland Energie B.V. became a controlled subsidiary of TAQA Europa B.V. and ultimately TAQA. The fair value of the identifiable assets and liabilities of BP Netherland Energie B.V. as at the date of acquisition were: 12 Fair value Previous recognised carrying on acquisition value (unaudited) (unaudited) AED 000 AED 000 Property, plant and equipment 2,034, ,739 Intangible assets 166,597 - 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 Abandonment provision 234, ,206 Deferred tax 641,920-1,016, ,356 Net assets acquired 1,747, ,346 Goodwill arising on acquisition * 898,311 Total acquisition cost 2,645,381

16 6 BUSINESS COMBINATION continued The total acquisition cost of AED 2,645 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 (2,645,381) Net cash outflow (2,265,298) AED 000 * Balance of goodwill as at the date of acquisition 898,311 Exchange difference 27,997 Balance of goodwill as at 31 March ,308 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 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 49.2 million to the profit of the Group. If the combination had taken place at the beginning of the year, the profit of the group would have been AED 77.2 million. 7 SEGMENTAL ANALYSIS For management purposes the Group is organised into two major 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. The segment carries out its operations in United Arab Emirates. Oil and Gas Segment This segment is engaged in Upstream, Midstream and Downstream oil and gas activities in Netherlands. 13

17 7 SEGMENTAL ANALYSIS continued Business segments The following table presents revenue, results and certain asset information regarding the Company s business segments for the three month period ended 31 March Power Oil and water and gas generation segment Total Three months ended 31 March 2007 AED 000 AED 000 AED 000 Results Revenue 900, ,930 1,048,373 Gross Profit 452,277 97, ,308 Finance Costs (555,040) Finance Income 183,817 Others (53,216) Profit before tax and minority interest 124,869 Other segment information At 31 March 2007 Segment assets 35,906,430 3,807,573 39,714,003 Unallocated corporate assets 12,992,247 Total consolidated assets 52,706,250 Three months ended 31 March 2006 Results Revenue 698, ,499 Gross Profit 334, ,605 Finance Costs (280,398) Finance Income 33,031 Others 15,979 Profit before tax and minority interest 103,217 Other segment information At 31 December 2006 Segment assets 34,954,532-34,954,532 Unallocated corporate assets 16,812,848 Total consolidated assets 51,767,380 Geographical segments The power and water generation segments carry out its operations in the United Arab Emirates. The Oil and Gas segment carry out its activities in Europe mainly The Netherlands. TAQA head quarters activities are based in Abu Dhabi. 8 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. - Due to the seasonal nature of TAQA Energy BV operations 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. 14

18 9 RELATED PARTY TRANSACTIONS The following table provides summary of significant related party transactions during the three month period: Shared Shared Sale of facilities Sale of facilities water and service water and service electricity charges electricity charges AED 000 AED 000 AED 000 AED 000 ADWEC 878, ,499 - Supplemental income backup fuel 21, Compensation of key management personnel For controlled subsidiaries key management personnel are provided by operation and maintenance companies under contractual agreements with the controlled subsidiaries. The remuneration of senior key management personnel of the Company during the period was as follows: AED 000 AED 000 Short-term benefits 1, PROPERTY, PLANT AND EQUIPMENT During the three months period ended 31 March 2007 the Group acquired assets with a cost of AED million (2006: AED 448 million), not including property, plant and equipment acquired through a business combination (note 6). 11 INTANGIBLE ASSETS Other than intangible assets acquired through a business combination (note 6), there were no acquisitions during the period (2006: nil). 15

19 12 COMMITMENTS AND CONTINGENCIES Capital expenditure commitments The authorised capital expenditure contracted for at 31 March 2007 but not provided for amounted to AED 6,474 million (2006: AED 5,212 million). Derivative financial instruments (i) Interest Rate Swaps In order to reduce its exposure to interest rates fluctuations on the interest bearing loans and borrowings and Islamic loans the Company s controlled subsidiaries entered into interest rate swap arrangements with counterparty banks for a notional amount that matches the outstanding interest bearing loans and borrowings and Islamic loans. The following table summarise the outstanding notional outstanding and the fair value position of the derivate instruments for each subsidiary as of 31 March 2007 and 31 December 2006: Derivative fair value Subsidiary Notional amount Assets Liabilities Assets Liabilities 31 March 31 December 31 March 31 March 31 December 31 December AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 ECPC 1,752,000 1,752, , ,997 GTTPC 2,733,000 2,733, , ,000 SCIPCO 4,286,000 4,286, , ,966 APC 5,678,458 5,678, , ,000 - TAPCO 8,392,000 7,841,855 53,000-70,000 - ESWPC 4,151,000 4,414, , ,000 Emirates CMS Power Company PJSC (ECPC) In order to reduce its exposure to interest rates fluctuations on the term loan and Islamic Ijara loan, the controlled subsidiary ECPC has entered into interest rate swap arrangements with counter-party banks for a notional amount that matches the outstanding term loan and Islamic Ijara loan. The notional amount outstanding at 31 March 2007 was AED 1,752 million (2006: AED 1,752 million). At 31 March 2007, the fixed interest rates vary from 6.31% to 6.33% (2006: 6.31% to 6.33%). The floating interest rate is LIBOR. In addition the Company uses forward foreign exchange contracts to hedge its risk associated with foreign currency fluctuations relating to scheduled maintenance cost payments to an overseas supplier. As a result of the debt refinancing arrangements concluded by the Company in March 2004, derivatives existing prior to the refinancing date have been extinguished and new interest rate swap contracts have been entered into as part of the debt refinancing arrangements. Consequently, the cumulative changes in fair values recognised in equity will be reclassified to the income statement over the period during which the previous hedged forecast transaction affects the income statement. Further, the new interest rate swap contracts do not qualify for hedge accounting and accordingly, changes in fair value are recorded in the consolidated income statement. Gulf Total Tractebel Power Company PJSC (GTTPC) In order to reduce its exposure to interest rates fluctuations on the term loan, the controlled subsidiary GTTPC has entered into an interest rate arrangement with counter-party banks for a notional amount that mirrors the draw down and repayment schedule of the term loan, covering at least 85% of the outstanding term loan. At 31 March 2007, the fixed interest rates vary from 6.7% to 6.95% (2006: 6.7% to 6.95%). The floating interest rate is LIBOR. The notional amount outstanding at 31 March 2007 was AED 2,733 million (2006: AED 2,733 million). The derivative instruments were entered into for the purpose of cash flow hedge. 16

20 12 COMMITMENTS AND CONTINGENCIES continued Derivative financial instruments continued Shuweihat CMS International Power Company PJSC (SCIPCO) In order to reduce its exposure to interest rates fluctuations on loans, the controlled subsidiary SCIPCO has entered into an interest rate arrangement with counter-party banks for a notional amount that mirrors the draw down and repayment schedule of the loans, covering not less than 75% of the outstanding loans. At 31 March 2007 the fixed interest rates vary from 5.04% to 6.354% (2006: 5.04% to 6.354%). The floating interest rate is LIBOR. The notional amount outstanding at 31 March 2007 was AED 4,286 million (2006: AED 4,286 million). The derivative instruments were entered into for the purpose of cash flow hedge. Arabian Power Company PJSC (APC) In order to reduce its exposure to interest rates fluctuations on the loans, the controlled subsidiary APC has entered into an interest rate arrangement with counter-party banks for a notional amount that mirrors the draw down and repayment schedule of the loans, covering not less than 85% of the outstanding term loan. At 31 March 2007 the fixed interest rates vary from 2.575% to % (2006: 2.575% to %). The floating interest rate is LIBOR. The notional amount outstanding at 31 March 2007 was AED 5,678 million (2006: AED 5,678 million). The derivative instruments were entered into for the purpose of cash flow hedge. Taweelah Asia Power Company PJSC (TAPCO) In order to reduce its exposure to interest rates fluctuations on the loans, the controlled subsidiary TAPCO has entered into an interest rate arrangement with counter-party banks for a notional amount that mirrors the draw down and repayment schedule of the loans, covering not less than 75% of the outstanding loans. The notional amount outstanding at 31 March 2007 was AED 8,392 million (2006: AED 7,841 million). At 31 March 2007, the fixed rates vary from % to 4.16% (2006: % to 4.16%). The floating interest rate is LIBOR. The derivative instruments were entered into for the purpose of cash flow hedge. Emirates Sembcorp Water and Power Company PJSC (ESWPC)) In order to reduce its exposure to interest rates fluctuations on the loans, the controlled subsidiary ESWPC has entered into an interest rate arrangement with counter-party banks for a notional amount that mirrors the draw down and repayment schedule of the loans, covering not less than 80% of the outstanding loans. The notional amount outstanding at 31 March 2007 was AED 4,151 million (2006: AED 4,414 million). At 31 March 2007, the fixed rates vary from 5.67% to 5.85%. (2006: 5.67% to 5.85%). The floating interest rate is LIBOR. The derivative instruments were entered into for the purpose of cash flow hedge. (ii) Forward Foreign Exchange Emirates CMS Power Company PJSC (ECPC) The Company uses forward foreign exchange contracts to hedge its risk associated with foreign currency fluctuations relating to scheduled maintenance cost payments to an overseas supplier. The outstanding forward foreign exchange commitment at the year end was AED 167 million (31 December 2006: AED 173 million). The forward foreign exchange contracts do not qualify for hedge accounting and accordingly, changes in fair value are recorded in the consolidated income statement. Shuweihat CMS International Power Company PJSC (SCIPCO) The Company uses forward foreign exchange contracts to hedge its risk associated with foreign currency fluctuations relating to scheduled maintenance cost payments to an overseas supplier. The outstanding forward foreign exchange commitment at 31 March 2007 amounted to AED 265 million (31 December 2006: AED 278 million). Other commitments TAQA has entered into an agreement with an infrastructure fund managed by a third party and has committed to invest US $200 million in the fund over a period of five years. 17

21 13 SUBSEQUENT EVENTS On 2 May 2007 the Company completed the purchase of CMS Generation Company for US$ 900 million and ABB Group interest in Jorf Lasfar Energy Company in Morocco and ST CMS Company in Neyveli, India for US$ 490 million. 18