Abu Dhabi National Energy Company PJSC ( TAQA ) MANAGEMENT DISCUSSION & ANALYSIS AND INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 Abu Dhabi National Energy Company PJSC ( TAQA ) MANAGEMENT DISCUSSION & ANALYSIS AND INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 SEPTEMBER 2012 (UNAUDITED)

2 Abu Dhabi National Energy Company PJSC ( TAQA ) MANAGEMENT DISCUSSION & ANALYSIS 30 SEPTEMBER 2012 (UNAUDITED)

3 Abu Dhabi National Energy Company PJSC ( TAQA ) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 SEPTEMBER 2012 (UNAUDITED)

4 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 ) and its subsidiaries (the Group ) as at 30 September 2012, comprising of the interim consolidated statement of financial position as at 30 September 2012 and the related interim consolidated statements of income and comprehensive income for the three month period and nine month period then ended, and interim consolidated statement 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 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: Richard Mitchell Partner Ernst & Young Registration No November 2012 Abu Dhabi

5 INTERIM CONSOLIDATED INCOME STATEMENT Period ended Three month period ended Nine month period ended 30 September 30 September Notes AED million AED million AED million AED million Revenues Revenue from oil and gas 2,560 2,742 7,747 8,056 Revenue from electricity and water 2,067 1,927 6,030 5,400 Fuel revenue 952 1,158 2,890 4,157 Gas storage revenue Net liquidated damages received Construction revenue 3 2,814-2,814 - Other operating revenue , ,833 6,168 20,618 18,743 Cost of sales Operating expenses (2,615) (2,362) (7,576) (7,776) Construction costs 3 (2,731) - (2,731) - Depreciation, depletion, and amortisation (1,372) (1,362) (4,105) (3,937) (6,718) (3,724) (14,412) (11,713) GROSS PROFIT 2,115 2,444 6,206 7,030 Administrative and other expenses (251) (210) (721) (631) Finance costs (1,241) (1,133) (3,754) (3,300) Changes in fair value of derivatives and fair value hedges Net foreign exchange gains (losses) (39) Bargain purchase gain Share of results of associates Share of results of joint ventures Gain from sale of joint venture Gain on sale of available for sale investment Gain on sale of land and oil and gas assets Interest income Impairment loss on available for sale investment 9 (83) - (83) - Gain on deemed disposal of associate Other income PROFIT BEFORE TAX 695 1,513 3,196 3,851 Income tax expense 5 (767) (702) (1,941) (2,017) PROFIT (LOSS) FOR THE PERIOD (72) 811 1,255 1,834 Attributable to: Owners of the parent (288) ,124 Non-controlling interests PROFIT (LOSS) FOR THE PERIOD (72) 811 1,255 1,834 Basic earnings per share attributable to owners of the parent (AED) 6 (0.05) The attached notes 1 to 21 form part of these interim condensed consolidated financial statements. 2

6 INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Period ended Three month period ended Nine month period ended 30 September 30 September AED million AED million AED million AED million Profit (loss) for the period (72) 811 1,255 1,834 Other comprehensive income Changes in fair values of derivative instruments in cash flow hedges (450) (3,105) (1,590) (4,133) Reclassification adjustment for losses included in the consolidated income statement ,142 1,138 Share of other comprehensive income of associates 9 (35) 3 (22) Board of Directors' remuneration - - (6) (4) Exchange differences arising on translation of overseas operations 856 (2,348) 875 (1,363) Changes in fair value of available for sale investments (22) (128) 167 (17) Impairment loss in available for sale investments recognised in the consolidated income statement Realised gain on sale of investment carried at fair value through other comprehensive income - - (415) - Other comprehensive income for the period 857 (5,169) 259 (4,401) Total comprehensive income for the period 785 (4,358) 1,514 (2,567) Attributable to: Owners of the parent 577 (3,397) 1,112 (1,874) Non-controlling interests 208 (961) 402 (693) 785 (4,358) 1,514 (2,567) The attached notes 1 to 21 form part of these interim condensed consolidated financial statements. 3

7 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION At (Audited) 30 September 31 December Notes AED million AED million ASSETS Non-current assets Property, plant and equipment 8 77,676 77,439 Operating financial assets 4,082 4,363 Available for sale investments ,122 Intangible assets 10 14,455 13,430 Investment in associates Investment in joint venture Advance and loan to an associate Other assets ,682 98,419 Current assets Inventories 2,960 3,122 Operating financial assets Advance and loan to associates Accounts receivable and prepayments 8,219 6,537 Cash and short-term deposits 3,568 3,988 15,984 14,874 Assets classified as held for sale 13-1,400 15,984 16,274 TOTAL ASSETS 114, ,693 EQUITY AND LIABILITIES Equity attributable to owners of the parent Issued capital 6,225 6,225 Treasury shares (293) (293) Equity contributed capital Other reserves 4,048 4,048 Retained earnings 1,825 1,138 Proposed dividends Foreign currency translation reserve 321 (554) Cumulative changes in fair value of available for sale investments Cumulative changes in fair value of derivatives in cash flow hedges (4,629) (4,344) 7,927 7,422 Non-controlling interests 1,312 1,433 Loans from non-controlling interest shareholders in subsidiaries 1,043 1,060 Loan from Abu Dhabi Water and Electricity Authority (ADWEA) 2,655 2,675 5,010 5,168 Total equity 12,937 12,590 4

8 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION At (Audited) 30 September 31 December Notes AED million AED million Non-current liabilities Investment in associate 4 86 Interest bearing loans and borrowings 14 61,652 67,178 Islamic loans 14 2,346 1,661 Deferred tax 4,697 4,606 Asset retirement obligations 8,049 7,502 Advances and loans from related parties Loan from non-controlling interest shareholders in subsidiaries Other liabilities 7,592 7,317 84,539 88,789 Current liabilities Accounts payable, accruals and other liabilities 6,418 6,627 Interest bearing loans and borrowings 14 8,737 4,911 Islamic loans Loans from non-controlling interest shareholders in subsidiaries Amounts due to ADWEA and other related parties Income tax payable 1, Bank overdrafts ,190 13,253 Liabilities classified as held for sale ,190 13,314 Total liabilities 101, ,103 TOTAL EQUITY AND LIABILITIES 114, ,693 DIRECTOR DIRECTOR CHIEF EXECUTIVE OFFICER The attached notes 1 to 21 form part of these interim condensed consolidated financial statements. 5

9 INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Nine month period ended Attributed to owners of the parent Cumulative Cumulative Loan from changes in changes in non-controlling Foreign fair value of fair value of interest Equity currency available derivatives Non- shareholders Share Treasury contributed Other Retained Proposed translation for sale in cash controlling in Loans from Total capital shares capital reserves earnings dividends reserve investments flow hedges Total interests subsidiaries ADWEA equity AED million AED million AED million AED million AED million AED million AED million AED million AED million AED million AED million AED million AED million AED million Balance at 1 January ,225 (293) 341 3,881 1, (2,822) 9,504 2, ,752 15,238 Profit for the period , , ,834 Other comprehensive income for the period (4) - (1,363) (17) (1,614) (2,998) (1,403) - - (4,401) Total comprehensive income for the period ,120 - (1,363) (17) (1,614) (1,874) (693) - - (2,567) Dividends paid (note 19) (607) (607) (607) Dividends paid to non-controlling interest shareholders in subsidiaries (356) - - (356) Share capital injection by non-controlling interest shareholders in a subsidiary Loans received from non-controlling interest shareholders in a subsidiary Repayment of loans (65) (87) (152) Balance at 30 September 2011 (unaudited) 6,225 (293) 341 3,881 2,292 - (1,150) 163 (4,436) 7,023 1,474 1,258 2,665 12,420 Balance at 1 January ,225 (293) 341 4,048 1, (554) 254 (4,344) 7,422 1,433 1,060 2,675 12,590 Profit for the period ,255 Other comprehensive income for the period (6) (165) (285) 419 (160) Total comprehensive income for the period (165) (285) 1, ,514 Dividends paid (note 19) (607) (607) (607) Dividends paid to non-controlling interest shareholders in subsidiaries (523) - - (523) Repayment of loans (17) (20) (37) Balance at 30 September 2012 (unaudited) 6,225 (293) 341 4,048 1, (4,629) 7,927 1,312 1,043 2,655 12,937 The attached notes 1 to 21 form part of these interim condensed consolidated financial statements. 6

10 INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS Nine month period ended Nine month Nine month period ended period ended 30 September 30 September Notes AED million AED million OPERATING ACTIVITIES Profit before tax 3,196 3,851 Adjustments for: Depreciation, depletion, and amortisation 4,105 3,937 Release of onerous contracts provision (88) (94) Employee benefit obligations, net (12) (2) Gain (loss) on exchange loans and borrowings and operating financial assets (25) 4 Exploration and evaluation costs derecognised during the period Bargain purchase gain 4 (100) - Gain on sale of land and oil and gas assets 13 (385) (80) Gain on sale of joint venture - (28) Gain on sale of available for sale investment 9 (415) - Interest expense and notional interest 3,399 2,993 Accretion expense Share of results of associates (123) (249) Share of results of joint venture (73) (85) Unrealised gains on fair valuation of derivatives and fair value hedges (188) (173) Impairment on available for sale investments Gain on deemed disposal of associate 11 (23) - Interest income (23) (38) Dividend income from available for sale investments (5) - Working capital changes: Inventories 149 (670) Account receivables and prepayments and other assets 782 (170) Amounts due to ADWEA and other related parties Accounts payable, accruals, and other liabilities (518) (272) Income tax paid (1,662) (1,209) Board of Directors' remuneration paid (6) (4) Asset retirement obligations payments (105) (75) Movement in operating financial assets Net cash from operating activities 8,645 8,471 7

11 INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS Nine month period ended Nine month Nine month period ended period ended 30 September 30 September Notes AED million AED million INVESTING ACTIVITIES Proceeds from sale of interest in joint venture - 1,151 Proceeds from sale of non-core assets 13 1, Additions to operating financial assets (1,950) (744) Purchase of property, plant, and equipment (3,021) (4,458) Purchase of subsidiary, net of cash acquired - 40 Purchase of available for sale investments 9 (86) (97) Dividends received from available for sale investments 5 - Receipt on business combination Proceeds from sale of available for sale investment Dividend received from associates Dividend received from joint ventures Loan repayment by an associate Purchase of intangible assets 10 (1,199) (118) Interest received Acquisition of other assets (48) - Net cash used in investing activities (3,265) (3,762) FINANCING ACTIVITIES Interest-bearing loans and borrowings received 14-4,653 Islamic loans received Repayment of Islamic loans 14 (88) (83) Repayment of interest-bearing loans and borrowings 14 (1,696) (6,760) Interest paid (3,214) (2,835) Dividend paid to owners of the parent 19 (607) (607) Dividend paid to non-controlling interest shareholders (512) (356) Repayment of loan from non-controlling interest shareholders (26) (116) Repayment of loan from ADWEA (262) (87) Net cash used in financing activities (5,611) (6,191) NET DECREASE IN CASH AND CASH EQUIVALENTS (231) (1,482) Net foreign exchange difference (71) 4 Cash and cash equivalents at 1 January 3,819 5,489 CASH AND CASH EQUIVALENTS AT 30 SEPTEMBER 12 3,517 4,011 The attached notes 1 to 21 form part of these interim condensed consolidated financial statements. 8

12 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 on the Abu Dhabi Securities Exchange through an Initial Public Offering ( IPO ) and 24.1% were offered through a private offering with the remaining 51% interest holding in the Company retained by ADWEA and, accordingly, the Company is a subsidiary of ADWEA. During the third quarter of 2008, TAQA issued mandatory convertible bonds which were converted into ordinary shares. The current shareholding of ADWEA is 51.0%, Farmers Fund is 21.1%, public ownership and other governmental entities is 27.9%. The Company continues to be a subsidiary of ADWEA which 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, water desalination and development, production and storage of 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 ) were authorised for issuance by the Board of Directors on 13 November BASIS OF PREPARATION AND ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION The interim condensed consolidated financial statements for the nine months ended 30 September 2012 have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The interim condensed consolidated financial statements have been presented in United Arab Emirates Dirhams ( AED ), which is the functional currency of the Company. All values are rounded to the nearest million (AED million) except otherwise indicated. 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 consolidated financial statements for the year ended 31 December In addition, results for the nine month ended 30 September 2012 are not necessarily indicative of the results that may be expected for the financial year ending 31 December As of 30 September 2012, the Company s current liabilities exceeded its current assets by AED 970 million. The financial statements have been prepared on a going concern basis since the Company has unused credit lines of AED 14.8 billion as of 30 September 2012 and further the management believes that the Company will generate sufficient cash flows from operations to meet its liabilities as and when they fall due. 2.2 SIGNIFICANT 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 Group s annual consolidated financial statements for the year ended 31 December 2011, except for the adoption of the following new standards and interpretations as of 1 January 2012, noted below: IAS 12 Income Taxes Deferred tax: Recovery of Underlying Assets (Amendment) IFRS 7 Financial Instruments: Disclosures- Enhanced Derecognition Disclosure Requirements (Amendment) The adoption of the above standards and interpretations did not have a material effect on the financial position or performance of the Group. 9

13 3 CONSTRUCTION REVENUE AND COSTS During the period ended 30 September 2012, construction revenue and costs were recognised in relation to the Jorf Lasfar expansion project in accordance with IAS 11 (see note 17(iii(b)). Construction revenue of AED 2,814 million has been recognized in the quarter due to the stage of completion now reached on the project with a corresponding accounts receivable balance being recognized with the offtaker. The total cumulative receivable from the offtaker at 30 September 2012 amounted to AED 2,977 million (31 December 2011: AED 1,060 million). 4 BUSINESS COMBINATION Acquisition of undivided interest in Otter Assets TAQA made the following acquisition which represents a business combination under IFRS 3: On 1 July 2011, TAQA Bratani completed the acquisition of a 31% undivided interest in the producing Otter field and associated infrastructure and agreements. The Otter field is tied back to the TAQA operated Eider subsea platform in the Northern North Sea (NNS) area of the UK continental shelf. The acquisition agreement for the 31% undivided interest included an option clause under which TAQA could acquire a further 50% undivided interest on commercially agreed terms. The option was exercised during January 2012, with acquisition of this interest completed on 24 February There is no non-controlling interest related to the acquisition. The provisional fair values of the identifiable assets and liabilities relating to the 50% undivided interests as at the transaction completion date were as follows: Fair value recognised on acquisition AED million Property, plant, and equipment 82 Deferred tax assets 68 Accounts receivable and prepayments 78 Accounts payable, accruals and other liabilities (22) Asset retirement obligations (192) 228 (214) Total identifiable net assets at fair value 14 Bargain purchase gain arising on acquisition (100) Net receipt on acquisition (86) From the date of acquisition, Otter assets have contributed AED 192 million of revenue and AED 26 million to the profit of the Group. If the above acquisition had taken place at the beginning of the year, the profit of the Group for the nine month period ended 30 September 2012 would have been AED 1,278 million and revenue would have been AED 20,722 million. The bargain purchase gain of AED 100 million has arisen on the above transaction as a result of the change in fair values between the economic date of the agreement (1 September 2009) and the legal completion date when purchase accounting was applied. 10

14 5 INCOME TAX Three months ended Nine months ended 30 September 30 September AED million AED million AED million AED million Current income tax: Current income tax charge ,871 1,915 Deferred income tax: Relating to origination and reversal of temporary differences Income tax expense ,941 2,017 6 BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent 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 parent 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 share data used in the earnings per share computations: Three months ended Nine months ended 30 September 30 September Profit (loss) for the period attributable to equity holders of the parent (AED million) (288) ,124 Weighted average number of ordinary shares issued (million) 6,066 6,066 6,066 6,066 Basic earnings (loss) per share (AED) (0.05) 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. The weighted average number of shares takes into account the treasury shares as at period end. 11

15 7 OPERATING SEGMENT INFORMATION For management reporting purposes the Group is organised into business units based on their geography, products and services, and has five reportable operating segments as follows: Power and Water Segment- U.A.E This segment is engaged in generation of electricity and production of desalinated water for supply in UAE. Power Segment Others This segment is primarily engaged in generation of electricity in Morocco, India, Ghana, Saudi Arabia and North America. Oil and Gas Segment-North America This segment comprises of the TAQA NORTH business unit and is engaged in Upstream and Midstream oil and gas activities in Canada and the United States. Oil and Gas Segment-United Kingdom This segment comprises of the TAQA Bratani business unit and is engaged primarily in upstream oil and gas activities in the United Kingdom. Oil and Gas Segment-Netherlands This segment comprises of the TAQA Energy business unit and is engaged primarily in Upstream and Midstream oil and gas activities in the Netherlands. No operating segments have been aggregated to form the above reportable segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss. Group financing (including finance costs except for the subsidiaries involved in power and water generation with project financing arrangements and interest income) is managed on a group basis and is not allocated to operating segments. Investment in certain associates with activities other than power and water generation and oil and gas and available for sale investments are managed on a group basis and are therefore not allocated to operating segments. Interest bearing loans and borrowings and Islamic loans except for the subsidiaries involved in power and water generation with project financing arrangements and bank overdrafts are managed on a group basis and are therefore not allocated to operating segments. 12

16 7 OPERATING SEGMENT INFORMATION continued The following table presents revenue and profit information for the Group s operating segments for the nine months ended 30 September 2012 and 2011 respectively: Adjustments Power & water Power eliminations generation generation Oil and gas - Oil and gas - Oil and gas - and UAE - Others North America Netherlands UK unallocated Consolidated AED million AED million AED million AED million AED million AED million AED million Nine months ended 30 September 2012: Revenue from external customers and construction revenue 5,280 6,510 2,542 1,223 5,063-20,618 Operating expenses and construction costs (1,043) (5,739) (1,108) (739) (1,671) (7) (10,307) Administrative and other expenses (105) (90) (333) (29) (43) (121) (721) Share of results of associates Share of results of joint venture Earnings before interest, tax, depreciation and amortisation (EBITDA) 4, , ,349 (9) 9,786 Depreciation, depletion, and amortisation (1,262) (85) (1,549) (199) (996) (14) (4,105) Earnings before interest and tax (EBIT) 2, (448) 329 2,353 (23) 5,681 Finance costs (1,762) (149) (109) (10) (196) (1,528) (3,754) Changes in fair value of derivatives and fair value hedges (4) 211 Net foreign exchange gains (losses) (2) 5 (2) 2 (11) Bargain purchase gain Gain on sale of land and oil and gas assets Gain on sale of available for sale investment Interest income Impairment loss on available for sale investment (83) (83) Gain on deemed disposal of associate Other income Income tax (expense) credit - (210) 21 (92) (1,831) 171 (1,941) Profit for the period 1, (129) (901) 1,255 13

17 7 OPERATING SEGMENT INFORMATION continued Adjustments Power & water Power eliminations generation generation Oil and gas - Oil and gas - Oil and gas - and UAE - Others North America Netherlands UK unallocated Consolidated AED million AED million AED million AED million AED million AED million AED million Nine months ended 30 September 2011: Revenue from external customers 6,482 3,250 3,401 1,046 4,564-18,743 Operating expenses (2,393) (2,599) (1,278) (497) (1,000) (9) (7,776) Administrative and other expenses (97) (75) (268) (35) (65) (91) (631) Share of results of associates Share of results of joint venture Earnings before interest, tax, depreciation and amortisation (EBITDA) 3, , , ,670 Depreciation, depletion, and amortisation (1,085) (72) (1,654) (247) (863) (16) (3,937) Earnings before interest and tax (EBIT) 2, , ,733 Finance costs (1,452) (144) (101) (11) (173) (1,419) (3,300) Changes in fair value of derivatives (24) 173 Net foreign exchange gains (losses) (29) 53 Gain from sale of joint venture Gain from sale of land assets Interest income Other income Income tax (expense) credit - (135) (106) (85) (1,831) 140 (2,017) Profit for the period 1, (1,149) 1,834 14

18 7 OPERATING SEGMENT INFORMATION continued The following table presents segment assets of the Group s operating segments as at 30 September 2012 and 31 December 2011: Adjustments, Power & water Power Oil and Oil and Oil and eliminations generation - generation- gas - gas - gas - and UAE Others North America UK Netherlands unallocated Consolidated AED million AED million AED million AED million AED million AED million AED million At 30 September 2012 Investment in associates Investment in joint venture Advance and loan to an associate ,137 1,157 Operating financial assets - 4, ,560 Other assets 53,180 6,927 31,965 9,606 4,560 1, ,681 Segment assets 53,180 11,561 31,965 9,606 5,272 3, ,666 At 31 December 2011 Investment in associates Investment in joint venture Assets classified as held for sale - - 1, ,400 Advance and loan to an associate ,188 1,208 Operating financial assets - 4, ,780 Other assets 55,338 4,884 30,632 8,824 4,501 1, ,058 Segment assets 55,338 9,738 32,032 8,824 5,236 3, ,693 15

19 8 PROPERTY, PLANT AND EQUIPMENT During the nine month period ended 30 September 2012 the Group acquired assets with a cost of AED 3,144 million (30 September 2011: AED 2,960 million), not including property, plant and equipment acquired through a business combination (note 4). 9 AVAILABLE FOR SALE INVESTMENTS At 30 September At 31 December AED million AED million Listed outside UAE Listed - in UAE - 7 Unquoted investment in managed fund outside UAE Total 406 1,122 Movement during the period is as follows: Nine months ended 30 September AED million AED million At 1 January 1, Additions during the period Changes in fair value during the period 248 (17) Sold during the period (note i) (956) - Impairment losses recognised during the period (note ii) (83) - Transfer to investment in associates (11) - At 30 September 406 1,027 (i) Tesla Motors On 8 April 2012, the Group successfully completed the sale of its holding in Tesla Motors, a listed investment outside the UAE, for a total consideration of AED 956 million (USD 260 million) realising a gain of AED 415 million recognised in the consolidated income statement. (ii) Impairment During the period, losses of AED 83 million have been recognised in the consolidated income statement due to a significant and prolonged decrease in fair value of two investments held by the managed fund. 16

20 10 INTANGIBLE ASSETS Exploration and evaluation Tolling Connection Computer assets agreement rights Goodwill software Total AED million AED million AED million AED million AED million AED million Cost: At 1 January , ,388 9, ,351 Additions 1, ,199 Transfer to oil and gas assets (98) (98) Sale of assets (11) - (11) Derecognised during the period (113) (113) Exchange adjustment At 30 September , ,388 10, ,593 Amortisation: At 1 January Amortisation for the period At 30 September Net book value before fair value adjustment: At 30 September , ,132 10, ,038 Fair value adjustment (note 18.1(vi)) Net book value after fair value adjustment: At 30 September 2012 (unaudited) 2,205 1,025 1,132 10, ,455 At 31 December 2011 (audited) 1,203 1,187 1,160 9, , INVESTMENT IN ASSOCIATES On 25 October 2011, TAQA acquired 19.9% shareholding in Western Zagros Resources Ltd. ( Western Zagros ), a listed company on the TSX Venture Exchange of Canada, for an amount of AED 163 million. On August 7, 2012 Western Zagros announced it had signed a strategic investment agreement with Crest Energy International LLC ( Crest ) for the latter to purchase, through a non-brokered, private placement, 40.7 million common shares in Western Zagros resulting in a reduction in TAQA s effective shareholding in Western Zagros to 17.96%. Accordingly, a gain on deemed disposal of AED 23 million was recognised in the consolidated income statement. 12 CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the interim consolidated statement of cash flows comprise the following amounts: At 30 September At 30 September AED million AED million Bank balances and cash 3,568 4,064 Bank overdrafts (51) (53) 3,517 4,011 17

21 13 SALE OF NON-CORE ASSETS During the year ended 31 December 2011, the Board of Directors approved the sale of certain non-core assets in Canada which were classified as assets and liabilities held for sale at 31 December During the period, the Group realised an amount of AED 1,810 million upon completion of the sale, which resulted in a gain of AED 385 million recognised in the consolidated income statement. 14 INTEREST BEARING LOANS AND BORROWINGS AND ISLAMIC LOANS Receipts: Loans received during the period are as follows: Nine month Nine month period ended period ended 30 September 30 September AED million AED million Interest bearing loans and borrowings - 4,653 Islamic loans (note i) Repayments: The Group made the following repayments during the period: Interest bearing loans and borrowings 1,696 6,760 Islamic loans (i) In November 2011, TAQA established a MYR 3.5 billion (US $ 1.1 billion) Sukuk programme. During the period ended 30 September 2012, an amount of MYR 650 million (US $ 215 million) was issued under the programme. The 10 year Sukuk was raised with a profit rate of 4.65% with a full swapped rate to US Dollars of 5.3% (note 18.1(ii)). 15 SEASONALITY OF OPERATIONS Due to higher electricity demand in the summer period in the United Arab Emirates, higher revenues and operating profits are usually expected for the power and water generation domestic subsidiaries in the second and third quarters of the year compared to the first and fourth quarters of the year. Due to high demand for natural gas in Canada and Europe in the winter period, higher revenues and operating profits are usually expected in the first and fourth quarters of the year compared to the second and third quarters of the year. Revenue from European midstream operations is generated during the first and fourth quarters of the year. 18

22 16 RELATED PARTY TRANSACTIONS The following table provides a summary of significant related party transactions included in the interim consolidated statements of income during the period: Three months ended Nine months ended 30 September 30 September AED million AED million AED million AED million Abu Dhabi Water and Electricity Company: Revenue from electricity and water 1,793 1,647 5,207 4,529 Fuel revenue ,814 Compensation of key management personnel For 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 Group during the nine month period was as follows: Nine months ended 30 September AED million AED million Short-term benefits Post employment benefits COMMITMENTS AND CONTINGENCIES (i) Capital expenditure commitments The authorised capital expenditure contracted for at 30 September 2012 but not provided for amounted to AED 3,290 million (31 December 2011: AED 1,623 million). (ii) Operating lease commitments Group as a lessor: Future capacity payments to be received by the Group under power and water purchase agreement ( PWPA ) based on projected plant availability as at 30 September 2012 amounts to AED 97.5 billion (31 December 2011: AED billion). Group as a lessee: Future minimum rentals payable under non-cancellable operating leases as at 30 September 2012 amounts to AED 2.9 billion (31 December 2011: AED 3.3 billion). (iii) Other commitments a) TAQA has entered into an agreement with an infrastructure fund managed by a third party and has committed to invest US $200 million (AED 735 million) in the fund over a period of five years. As of 30 September 2012, an amount of AED 523 million (US $135 million) (31 December 2011: AED 400 million, US $109 million) has been invested in the fund and is treated as an available for sale investment. 19

23 17 COMMITMENTS AND CONTINGENCIES continued (iii) Other commitments continued b) During 2009, Office National de l'electricité ("ONE"), Jorf Lasfar Energy Company ("JLEC") and TAQA signed a strategic partnership agreement to extend the capacity of JLEC by two new units of an approximate gross capacity of 350 MW each. As per this agreement, JLEC through its affiliate JLEC 5&6 will build, own, and operate the new units 5 and 6 under a 30-year power purchase agreement with ONE. The project EPC contract represents the significant majority of the cost commitment related to the project and commits the Group to spend approximately AED 3,805 million in the construction of the facilities, out of which AED 2,731 million has been incurred at 30 September 2012 (31 December 2011: nil). c) As at the reporting date TAQA North has entered into contractual commitments, mainly pipeline usage and drilling, under which they are committed to spend AED 545 million prior to 31 December d) On 8 April 2012, TAQA signed a joint venture agreement with Mass Global Investments Company Limited ("MGIC"). Under the agreement, TAQA will acquire up to a 50% interest in the 1,000 MW gas fired Independent Power Plant (IPP) situated near Sulaymaniyah, in the Kurdish region of the Republic of Iraq. The power plant has been operating from 2009 and has a capacity of 1,000 MW. The transaction is subject to the fulfillment of certain conditions precedent and is expected to complete in the final quarter of (iv) Contingencies a) As a result of acquisitions made in prior periods, there are contingent liabilities arising from (a) tax assessments or proposed assessments and (b) certain other disputes, all of which are being contested. Pursuant to the Purchase and Sale Agreements between TAQA and the sellers, the sellers have provided TAQA and its subsidiaries with indemnity obligations with respect to such contingent liabilities for the periods prior to date of the respective acquisitions. b) TAQA GEN X LLC ( LLC ) is the owner by assignment of a Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement dated as of September 17, 1999 (the Tolling Agreement ) by and between AES Red Oak, L.L.C. ( AES ) and Williams Energy Marketing & Trading Company, as well as other ancillary rights and agreements. LLC entered into an Energy Management Agreement ( EMA ) and an ISDA Master Agreement ( ISDA ) both dated 28 December 2010 with Morgan Stanley Capital Group Inc. to manage the energy products under the Tolling Agreement and ancillary rights and agreements. The Group has guaranteed the obligations of LLC to Morgan Stanley Capital Group Inc. under the EMA and ISDA agreement. Payments under this guarantee shall not exceed US$100 million (AED 367 million) (2011: US$ 100 million (AED 367 million)) over the life of the EMA. c) In August 2010, the former CEO of TAQA parent filed a lawsuit against TAQA parent and its subsidiary TAQA New World Inc. alleging various causes of action, including breach of contract, retaliatory termination, and physical and emotional distress. TAQA filed a motion to dismiss on jurisdictional grounds, and this motion was granted by the U.S. District Court on 28 September The former CEO gave notice of his intention to appeal the dismissal on 24 October 2011 and filed his opening brief on 25 January TAQA filed its brief on 5 March The former CEO filed his reply brief on 12 April 2012 and TAQA is currently awaiting a date for the hearing. d) In addition to the above, there are certain guarantees and letters of credit arising in the ordinary course of business to which TAQA and certain other subsidiaries are parties. These do not create any material additional obligations other than what is disclosed in the consolidated statement of financial position as at period end. 20

24 18 FINANCIAL INSTRUMENTS 18.1 Hedging Activities (i) Interest Rate Swaps - Cash flow hedges In order to reduce its exposure to interest and profit rate fluctuations on the interest bearing loans and borrowings and Islamic loans the Group s subsidiaries entered into interest rate swap arrangements with counter-party banks for notional amounts that match the outstanding interest bearing loans and borrowings and Islamic loans The derivative instruments were designated as cash flow hedges. The following table summarises the outstanding notional amounts and the fair value position of the derivate instruments for each subsidiary as of 30 September 2012 and 31 December 2011: Derivative fair value Subsidiary Notional amount Liabilities Liabilities 30 September 31 December 30 September 31 December AED million AED million AED million AED million ECPC 1,242 1, GTTPC 3,046 3, SCIPCO 3,367 3, APC 2,699 2, TAPCO 6,579 6,736 1,230 1,178 ESWPC 4,177 4,250 1,079 1,017 FAPCO 5,894 5,904 2,132 2,013 RPC 5,448 5,578 1,911 1,771 32,452 32,945 8,309 7,908 (ii) Cross currency Swaps - Cash flow hedges TAQA Corporate In December 2010, TAQA entered into cross currency interest rate swap agreements with a group of banks to hedge the Group s foreign exchange exposure for a portion of the Euro bond amounting to EUR 197 million. The notional amount outstanding at 30 September 2012 was EUR 197 million (31 December 2011: EUR 197 million). The derivative instrument had a negative fair value of AED 7 million at 30 September 2012, which is included within other liabilities in the consolidated financial position (31 December 2011: positive fair value of AED 6 million). During the period ended 30 September 2012, the Group entered into cross currency rate swap agreements to hedge the Group's exposure on the Malaysian Ringgit Sukuk issued during the period (note 14). Under the terms of the cross currency rate swaps, TAQA is required to pay fixed rate of 5.3% per annum on an initial exchange amount of US $215 million and receive a fixed rate of 4.65% per annum on an amount of MYR 650 million. The derivative instrument had a negative fair value of AED 120 million at 30 September 2012, which was included within other liabilities in the consolidated financial position. (iii) Hedge of net investment in foreign operations Included in loans at 30 September 2012 is a borrowing of Euro 553 million (AED 2,609 million) (31 December 2011: Euro 553 million (AED 2,633 million)) which has been designated as a hedge of the net investment in the Netherlands subsidiary TAQA Energy BV and is being used to hedge the Group s exposure to foreign exchange risk on this investment. During the period ended 30 September 2012, a loss of AED 24 million on the retranslation of this borrowing (30 September 2011: no loss no gain was recorded) was transferred to equity to offset any gains or losses on translation of the net investment in this subsidiary. There is no hedge ineffectiveness in the periods ended 30 September 2012 and 30 September

25 18 FINANCIAL INSTRUMENTS continued 18.1 Hedging Activities continued (iv) Forward Foreign Exchange Contracts - Cash flow hedges In order to reduce the exposure to foreign currency fluctuations on payments to overseas suppliers, certain subsidiaries have entered into forward foreign exchange contracts. These forward foreign exchange contracts have been designated as cash flow hedges and accordingly changes in fair values are recorded in equity. The following table summarises the outstanding notional amounts and the fair value position of the derivate instruments for each subsidiary as of 30 September 2012 and 31 December 2011: Derivative fair value Subsidiary Notional amount Assets Assets Liabilities Liabilities 30 September 31 December 30 September 31 December 30 September 31 December AED million AED million AED million AED million AED million AED million SCIPCO FAPCO RPC ,201 1, (v) Forward Sales Transactions Cash flow hedges TAQA NORTH In order to reduce its exposure to commodity prices, the Company's wholly owned subsidiary TAQA NORTH utilises derivative financial instruments, including zero cost collars, to mitigate the impact of crude oil and natural gas price fluctuations on highly probable forecast (sale) transactions. These commodity derivatives are designated as cash flow hedges; the effective portion of gain and losses being initially recorded in other comprehensive income and deferred in equity before being transferred to the consolidated income statement when the hedged transaction affects the income statement or the forecast transaction is no longer highly probable. Effectiveness is assessed only during those periods in which there is a change in intrinsic value of the hedging instrument. Changes in the time value of the options are excluded from the assessment of effectiveness and together with any ineffective portion of gains and losses are recognised directly in the consolidated income statement in each reporting period. The notional amount outstanding at 30 September 2012 was 1.5 million bbls of crude oil (31 December 2011: 3.2 million bbls of crude oil and GJ 1.8 million of natural gas). The positive fair market value of these instruments as at 30 September 2012 was CAD 1.7 million (AED 6 million) (31 December 2011: negative fair market value of CAD 12 million (AED 43 million)). The net realised and unrealised gain recognised in the consolidated income statement relating to such instruments are AED 22 million for the nine months ended 30 September 2012 (30 September 2011: AED 93 million). During the period, the Board has authorised the suspension of the commodity hedging program by TAQA NORTH and the settlement of existing arrangements. (vi) Other Fair value hedges TAQA GEN X LLC, a subsidiary of TAQA utilises derivative instruments, which include futures and forwards as a hedge strategy to manage the exposure of the underlying Tolling Agreement. Forward and future transactions are contracts for delayed delivery of commodity instruments in which the counterpart agrees to make or take delivery at a specified price. As at 30 September 2012, the net fair value of exchange-traded derivative instruments was AED 218 million shown under other accounts receivable and prepayments (31 December 2011: AED 21 million). The net realised and unrealised gains recognised in the consolidated income statement relating to such instruments are AED 308 million for the period ended 30 September 2012 (30 September 2011: net realized and unrealised losses of AED 223 million). During the year ended 31 December 2010, the Tolling Agreement recognised as an intangible asset at acquisition was adjusted for the change in fair value for movements in the designated hedge risk in a fair value hedge relationship. The changes in the fair value of the Tolling Agreement for the period ended 30 September 2012 was a loss of AED 117 million (note 10) (30 September 2011: gain of AED 301 million), which was recognised in the consolidated income statement. 22

26 18 FINANCIAL INSTRUMENTS continued 18.2 Fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Level 2: Level 3: Quoted (unadjusted) prices in active markets for identical assets or liabilities. Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Total Level 1 Level 2 Level 3 AED million AED million AED million AED million At 30 September 2012 Financial assets measured at fair value Available-for-sale investments Forward foreign exchange contracts Futures and forward contracts Commodity forward contracts Financial liabilities measured at fair value Interest rate swaps hedged 8,309-8,309 - Forward foreign exchange contracts Cross currency interest rate swaps At 31 December 2011 Financial assets measured at fair value Available-for-sale investments 1, Forward foreign exchange contracts Cross currency interest rate swaps Futures and forward contracts Financial liabilities measured at fair value Interest rate swaps hedged 7,908-7,908 - Forward foreign exchange contracts Commodity forward contracts DIVIDENDS During the period ended 30 September 2012, dividends of AED 607 million (10 fils per share) were paid (30 September 2011: AED 607 million, 10 fils per share). 20 EVENT AFTER REPORTING PERIOD On 17 October 2012, TAQA North acquired oil and gas properties in Central Alberta from Nuvista Energy Limited for a total consideration of US $162 million, subject to adjustments. The assets are located in core areas of TAQA North s operations and include land, oil and gas wells and facilities. The transaction s effective date is 1 June 2012 and will add approximately 6,000 barrels of oil equivalent per day of liquid rich natural gas production. 23

27 21 COMPARATIVE INFORMATION Certain comparative figures were reclassified to conform with the current year presentation. Such reclassifications as discussed below have no effect on profit or the equity of the Group. - Interest paid amounting to AED 2,835 million for the nine months period ended 30 September 2011 previously shown under net cash from operating activities now been reclassified as part of net cash used in financing activities. - Staff costs related to domestic subsidiaries in the amount of AED 47 million has now been reclassified from operating expenses to administrative and other expenses. 24