Annual Report 2010 - Christchurch City Council

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Other financial assets (continued) Financial statements Annual Report Christchurch Otautahi 2010 p181. Notes to financial statements 16. Other financial assets (continued) (b) Non-current financial assets Parent Group 30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 Actual Actual Actual Actual $000s $000s $000s $000s Interest-bearing loans advanced to subsidiaries: Vbase Ltd 83,022 79,463 - - Jet Engine Facility Ltd 12,550 12,550 - - Tuam Ltd 13,750 13,750 - - Civic Building Ltd 59,288 42,560 - - CCC Two Ltd 17,800 - - - Total advances to subsidiaries 186,410 148,323 - - Advance to Theatre Royal 2,300 2,300 2,300 2,300 Community, special and other loans 2,876 3,278 2,876 3,278 Less provision for fair value and impairment (4,300) - (1,300) - Other loans and advances - - 741 1,172 Total non-current loans and advances 187,286 153,901 4,617 6,750 Other investments: Local authority stock 19,000 27,995 19,000 27,995 Stocks and bonds with over one year to maturity 23,106 26,179 23,106 26,179 Bank deposits with over one year to maturity 8,000 - 8,000 - Investment in unlisted shares (excl CCC/CCHL subsidiaries) 6,084 6,227 6,084 6,227 Investment in Enertech Capital Partners 11 LP - - 3,100 3,000 Total other investments 56,190 60,401 59,290 63,401 Shares in subsidiaries: CCHL 1,290,004 1,373,004 - - Vbase Ltd 128,558 110,100 - - Civic Building Ltd 4,148 2,400 - - CCC Two Ltd 1,100 - - - Total shares in subsidiaries 1,423,810 1,485,504 - - Total non-current financial assets 1,667,286 1,699,806 63,907 70,151 Total other financial assets (current and non-current) 1,784,229 1,737,056 180,962 139,482
p182. Annual Report Christchurch Otautahi 2010 Financial statements Other financial assets (continued) Notes to financial statements 16. Other financial assets (continued) Fair value Term deposits The carrying amount of term deposits approximates their fair value. Local authority stock The fair value of local authority and government stock is $34.3 million (2009: $43.6 million). Fair value has been determined by discounting cash flows from the instruments using a discount rate derived from relevant market inputs. The discount rates range between 2.89-5.38% (2009: 2.80-5.96%). The face value of local authority stock is $33 million (2009: $42.2 million). Stocks and bonds The fair value of stocks and bonds is $28.1 million (2009: $29.6 million). Fair value has been determined by discounting cash flows from the instruments using a discount rate derived from relevant market inputs. The discount rates range between 2.89-5.38% (2009: 2.80-5.96%). The face value of stocks and bonds is $26.4 million (2009: $27.7 million). Loans to related parties The fair value of loans to related parties is $218.8 million (2009: $178.2 million). Fair value has been determined using cash flows discounted at a rate based on the borrowing rates ranging from 2.89-5.38% (2009: 2.80-5.96%). The average effective interest rate on the loan to related parties is 8.25% (2009: 8.57%). The face value of the loans to related parties is $188.1 million (2009: $152.8 million). Loans advanced to subsidiaries at balance date are shown in the table to note 16. Unlisted shares Unlisted shares include $1.4 million in New Zealand Local Government Insurance Corporation, (NZLGIC) and $4.7 million in Endeavour I-cap. The fair value of unlisted shares of NZLGIC have been determined by using the asset valuation as per their latest published accounts. The Endeavour I-cap funds were invested for the purposes of enabling a portion of Council's investment portfolio to be applied to new economic development initiatives which would benefit the local economy while ultimately providing a return to Council. The determination of the fair value of this investment fund is consistent with prior years. The fair value calculation has been audited by KPMG Wellington Impairment There were no impairment provisions for other financial assets. None of the financial assets are either past due or impaired. Shares in subsidiary companies The fair value of Council’s investments in its subsidiary companies was assessed by independent valuers Ernst and Young, as at 30 June 2010 on the basis of their net asset value on a going concern basis. Council’s investment in CCHL was reduced in the year by $83 million, as a result of the following: • a reduction in the value of Orion New Zealand Ltd (ONZL) by $69 million, mainly due to a change in the regulatory environment. Orion New Zealand Ltd now operates under the Commerce Commission- imposed price control regime. Considerable uncertainty remains as to how the new regime will be applied. • a further reduction to reflect the change in the net asset position of CCHL, as a result of the payment of special dividends to Council. • Offset by an increase in the value of Christchurch International Airport Ltd (CIAL) by $41 million was mainly as a result of the revaluation of the property portfolio. The valuation was completed using a combination of methods – a capitalisation of earnings approach for the core airport operations (comprising the aeronautical land, sealed surfaces and infrastructure, and the terminal facilities) and a net asset value approach for the airport’s property portfolio assets. The remaining CCHL subsidiaries were revalued as at 30 June 2009. The investment in all of CCHL’s subsidiaries were reviewed by Ernst and Young as at 30 June 2010 to determine whether there are any significant indicators of value change since their last full valuation. Council’s investment in Vbase Ltd increased in the year by $49 million. This increase relates to the purchase of redeemable preference shares. This was offset by a $30 million write-down of the investment in Vbase due to losses and deferred tax adjustments in the year. Civic Building Ltd has increased in value in the year due to equity advanced of $1.7 million. Cost prices have been used to estimate fair value of the building during the period of construction. For more details on the joint venture between Civic Building Limited and Ngai Tahu Properties Ltd see note 21. In August 2009 Council invested $1.1 million in CCC Two Ltd by way of redeemable preference shares. For more details on this investment see note 43 Business Combinations. In 2009 Tuam Ltd, which owns the current civic office in Tuam Street, was written down to zero in 2009, reflecting the drop in property prices and the Council’s departure to new premises in August 2010. Enertech investment These amounts relate to Orion Group Ltd’s investments in Enertech Capital Partners (an offshore venture capital limited liability partnership). The Enertech investment has a carrying value of $3.1 million (2009: $3.0 million), and invests in individual high technology and start up type entities. Individual investments remain in the name of the venture capital partnership. The investment held is not publicly traded and is recorded at the directors’ estimate of fair value and is revalued annually. The value is based on the group’s share of partnerships net assets.
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Annual Report 2010 - Christchurch City Council

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