Consolidated financial statement 2011 - Aquafin
Consolidated financial statement 2011 - Aquafin
Consolidated financial statement 2011 - Aquafin
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Green light for clear water<br />
Annex to the Annual Report<br />
<strong>Consolidated</strong> <strong>financial</strong><br />
<strong>statement</strong> <strong>2011</strong><br />
According to IFRS
Content<br />
3<br />
Report of the Board<br />
of Directors on the<br />
<strong>financial</strong> year <strong>2011</strong><br />
21<br />
<strong>Consolidated</strong><br />
<strong>financial</strong> <strong>statement</strong><br />
1
2<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong>
Report of the Board<br />
of Directors for<br />
the <strong>financial</strong> year <strong>2011</strong><br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
Most important developments during the <strong>financial</strong> year 4<br />
Expansion of the wastewater treatment infrastructure for the Flemish Region 7<br />
Management of the wastewater treatment infrastructure for the Flemish Region 10<br />
Services beyond the scope of the agreement with the Flemish Region 13<br />
Research and product development 14<br />
Major risk factors 15<br />
The most important developments after the close of the <strong>financial</strong> year 16<br />
Comments with regard to the consolidated balance sheet 17<br />
Comments on the consolidated profit and loss <strong>statement</strong><br />
and the overview of realised and unrealised results 18<br />
3
4<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
As set out in our strategic plan, <strong>Aquafin</strong> has continued with<br />
the expansion and intensification of our core activities in<br />
accordance with the model of 'customer intimacy'. The volume<br />
of studies and tendered projects for the Flemish Region<br />
and the municipal clients combined was exceptionally high<br />
in <strong>2011</strong>.<br />
Operationally, we scored very well, with a treated-water<br />
quality that was better than it had ever been. With those<br />
results, we were able to strengthen our reputation as a centre<br />
of expertise throughout the wastewater cycle in Belgium<br />
and abroad.<br />
Most important developments during<br />
the <strong>financial</strong> year<br />
FROM SUPPLY TO DEMAND-DRIVEN COMPANY<br />
n<br />
Clear commitments to stakeholders<br />
<strong>Aquafin</strong>'s unique selling proposition is our complete<br />
familiarity with the wastewater cycle. At the European level,<br />
we are among the leaders in every aspect of water treatment:<br />
from sector expertise, technical and technological expertise<br />
to operational experience, asset management and <strong>financial</strong><br />
expertise. As a result, we can offer our clients a full range of<br />
services within the business model of 'customer intimacy'.<br />
For our clients, that means custom work, transparent<br />
budgets and clear schedules. We are not concerned solely<br />
with satisfied customers who will return. We want all of our<br />
stakeholders to have pleasant experiences when they have<br />
dealings with <strong>Aquafin</strong>.<br />
The greater the level of autonomy of teams and individual<br />
employees, the clearer it will have to be for everyone what<br />
the company stands for and where we want to go.<br />
<strong>Aquafin</strong> already had a clearly defined mission, a vision and<br />
explicit company values. Those values have been translated<br />
further over the past year into concrete commitments to all<br />
of our stakeholders. These commitments are not inflexibly<br />
cast in stone; they are a framework that clearly shows how<br />
personnel should treat customers and other stakeholders on<br />
the basis of the company philosophy, without having to check<br />
with superiors at every turn. That gives more freedom of<br />
movement for taking initiative.<br />
n<br />
Creation of process-driven teams<br />
To be able to work customer-driven, <strong>Aquafin</strong> had to<br />
transform itself from being supply-driven to demand-driven.<br />
In <strong>2011</strong>, we went further with the implementation of processdriven<br />
work throughout the organisation. As part of that<br />
programme, the complete IT architecture was redesigned.<br />
The first migrations will take place in 2012.<br />
Demand-driven operations means much more than simply<br />
turning the company structure, however. To be successful,<br />
the learning capability of the organisation must be improved<br />
and the autonomy of the personnel strengthened. Within the<br />
company, we are creating multidisciplinary teams that are<br />
collectively responsible for a complete process and we are<br />
essentially abandoning the idea of specialised departments.<br />
The biggest step in that area was the installation of the<br />
business units at the end of last year; which should improve<br />
the interaction between the core processes of Vision creation<br />
on the network and Accelerated project execution and the<br />
management process of Account management.<br />
CONTINUOUS IMPROVEMENT<br />
We believe that Continuous Improvement is such<br />
a necessity that the way that we want to grow as an<br />
organisation is defined as a process in <strong>Aquafin</strong>.<br />
It is expressed by bringing improvement proposals<br />
together across departments and prioritising them<br />
on the basis of business cases, by monitoring<br />
implementation and checking on the results achieved.<br />
Specific Continuous Improvement disciplines, which<br />
were previously scattered throughout the company,<br />
have been brought together in the Business Excellence<br />
department, which was established in <strong>2011</strong>: Process<br />
Management, Knowledge Creation, Cost Management,<br />
and Energy Management.
FINANCING AQUAFIN IN A CHANGED MARKET<br />
n<br />
Implementation phase 2 purchase of VMM assets<br />
n<br />
Shift to institutional investors<br />
In <strong>2011</strong>, <strong>Aquafin</strong>'s financing needs were much greater than<br />
they had been in the previous years. That was primarily due<br />
to the purchase of the properties and plants of the Vlaamse<br />
Milieumaatschappij (Flemish Environmental Agency) that<br />
the region had imposed. In the current <strong>financial</strong> situation,<br />
it is advisable to prepare the financing before it is needed,<br />
even though <strong>Aquafin</strong> had never had problems in that respect.<br />
After the banking and <strong>financial</strong> crisis, the financing<br />
landscape had become drastically different. The 'cost of fund' of<br />
the banks has risen sharply and a high degree of diversification<br />
between the banks has taken place. As a result, the banks<br />
were limited in their ability to provide additional loans, but<br />
the possibilities of borrowing via commercial paper from other<br />
investors were sufficiently extensive. With its strong credit<br />
rating, <strong>Aquafin</strong> certainly qualified. That alternative financing<br />
was found with Belgian institutional investors, based on our<br />
own borrowing documentation, and sought via BNP Paribas<br />
Fortis and Dexia Bank Belgium.<br />
n<br />
New borrowing from the European Investment Bank<br />
Negotiations are also underway with the European<br />
Investment Bank for new credit. The EIB and <strong>Aquafin</strong> have been<br />
working together since 1994. <strong>Aquafin</strong> is very grateful to that<br />
institution for the advice and the support it has given during all<br />
this time. Including the eighth loan that is now in preparation,<br />
the European Investment Bank has supported the watertreatment<br />
sector in Flanders to the amount of €1.4 billion.<br />
n<br />
New financing challenges<br />
The evolution on the <strong>financial</strong> markets has had an impact<br />
on the structure under which <strong>Aquafin</strong> meets its <strong>financial</strong><br />
needs. Until 2010, there was a match between the payments<br />
of the principle on the loans over the long term and the<br />
receipts from invoices to the Flemish Region / drinking water<br />
companies. The result of the changed market conditions is<br />
that <strong>Aquafin</strong> cannot continue to meet the financing<br />
requirement with credit with the desired characteristics (loans<br />
with terms of less than 30 years and 'bullet' loans where only<br />
the interest is paid and not the principal, rather than loans<br />
where the principle is also paid down). It therefore becomes<br />
possible for the payments by the drinking water companies<br />
not to completely cover the repayments of the loans, with the<br />
result that there is a risk that no financing at reasonable terms<br />
is available in the cash or capital markets at the moment that<br />
the existing financing arrangements expire. <strong>Aquafin</strong> will always<br />
be able to count on the drinking water companies/the Flemish<br />
Region for revenues to repay all of the loans. The latter is<br />
explicitly stated for the long-term loans, which fall under the<br />
allocation agreement (allocation ratio).<br />
In addition to the financing of the optimisation programme,<br />
long-term financing has been acquired to purchase treatment<br />
plants and the property of the Vlaamse Milieumaatschappij<br />
(Flemish Environmental Agency). The first phase of the<br />
purchase took place in 2010, for an amount of more than<br />
€150 million. In <strong>2011</strong>, the second phase of that operation<br />
was executed and <strong>Aquafin</strong> purchased property and plants of<br />
the VMM assets for nearly €154 million.<br />
In 1994, under the terms of the management agreement<br />
between the Flemish Region and <strong>Aquafin</strong>, the company<br />
acquired the user rights for the treatment plants that had<br />
already been established before the company was operating.<br />
Those plants are not carried on the <strong>Aquafin</strong> balance sheets.<br />
The capital spending for the renovations and expansion of<br />
those plants, which <strong>Aquafin</strong> has had done over the previous<br />
several years, are carried on our balance sheets. Inasmuch as<br />
the management of those assets by two parties proved not<br />
to be efficient, the Flemish Government decided to allow<br />
<strong>Aquafin</strong> to purchase, operate and finance the plants and<br />
the property that were in the hands of the VMM. To make<br />
the financing of those purchases of the VMM plants possible,<br />
the management agreement and the affectation agreement<br />
were amended.<br />
Part of the purchase was not done with borrowed capital,<br />
but financed from equity, and is not charged in the drinking<br />
water invoices. The matching amount may be charged if<br />
the management agreement were ever to come to an end.<br />
The part that is being financed with borrowed capital will<br />
be charged over a period of 20 years. To finance the purchase,<br />
<strong>Aquafin</strong> approached non-<strong>financial</strong> institutions, including<br />
insurance companies and pension funds, whose own<br />
obligations (cf. Solvency II) led them to favour this credit<br />
formula. In general, they were interested in an amortised debt<br />
repayment over 20 years, which matches the invoice streams<br />
to the drinking water companies.<br />
n<br />
<strong>Aquafin</strong>´s credit rating matches that of the Flemish Region<br />
Credit rating agency Moody´s lowered Belgium´s credit<br />
rating at the end of <strong>2011</strong>. A short time later, the Flemish Region,<br />
the Francophone Community and the Walloon Region also<br />
saw their credit ratings lowered. The Flemish Region went down<br />
by two levels to Aa2, with negative prospects. That rating was<br />
still higher than the rating of Belgium, which is Aa3.<br />
The assessment of the creditworthiness of <strong>Aquafin</strong> is at the<br />
same level as the Flemish Region. That adjustment was only<br />
inspired by the close band that <strong>Aquafin</strong> has with the Flemish<br />
Region. It is not affected by <strong>Aquafin</strong>'s <strong>financial</strong> structure,<br />
which is unchanged.<br />
Report of the Board of Directors<br />
5
6<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
The P-1 short-term rating remained unchanged. Even with<br />
that changed rating, <strong>Aquafin</strong> was still at the top of creditworthy<br />
companies. The company continued to enjoy the<br />
confidence of various lenders.<br />
n<br />
Active interest management<br />
Through active management of the interest risk <strong>Aquafin</strong><br />
wishes to optimize the financing costs. In May 2006, the Board<br />
of Directors approved the outlines of a dynamic management<br />
procedure for interest-rate risks. The interest policy was<br />
modified in 2008. In 2009, primarily the descriptions and<br />
definitions were modified. No changes were made to the<br />
principles themselves.<br />
Active interest management can be applied to a maximum<br />
of 35% of the underlying debt of <strong>Aquafin</strong>’s total long-term<br />
debts. Its objective is to achieve interest savings. The portfolio<br />
may be built up as follows: minimum of 65% of fixed interest<br />
rates and 35% of variable rates, 25% of which with a maximum<br />
ceiling and 10% fully variable. To cover future financing needs,<br />
the interest rate policy results in a dynamic interestmanagement<br />
programme up to 50% of the future long-term<br />
debts, with a 5-year horizon. It is important to ensure that<br />
the risks are covered and that an underlying loan matches<br />
the coverage structure.<br />
n<br />
Bookkeeping converted to the international standard<br />
As of year-end at 31 December <strong>2011</strong>, <strong>Aquafin</strong> reports<br />
according to the IFRS standards that apply. In addition to<br />
reporting in accordance with the Belgian Generally Accepted<br />
Accounting Principles (Belgian GAAP), consolidated IFRS<br />
<strong>financial</strong> <strong>statement</strong>s are also prepared. They include a balance<br />
<strong>statement</strong>, an overview of realised and unrealised results,<br />
a change overview of net equity, cash flow <strong>statement</strong> and<br />
extensive explanations, including valuation rules.<br />
EU FINE FOR BELGIUM - THE LATEST STATE<br />
OF AFFAIRS<br />
At the moment, Belgium is not compliant with the<br />
provisions of the European Urban Waste Water Directive for<br />
agglomerations of more than 10,000 people equivalents.<br />
In respect of that situation, Europe is filing an application with<br />
the European Court to have Belgium found to be in violation.<br />
With respect to Flanders, there is only one agglomeration/<br />
treatment plant – the one in Beersel – that is not completely<br />
compliant. That plant is operational, but the mandatory<br />
samples couldn’t be submitted for a full year yet.<br />
The <strong>financial</strong> results of the interest management are<br />
calculated against individual benchmarks (the result of an<br />
individual strategy in comparison with the applicable interest<br />
swap at the moment of the establishment/execution of the<br />
structure). The interest cost of the underlying loan must be<br />
taken together with the results of the structure built on top of<br />
it, in order to see <strong>Aquafin</strong>'s ultimate debt burden. The <strong>financial</strong><br />
results are offset with the drinking-water companies.<br />
New structures were established in <strong>2011</strong> for our future<br />
financing requirements. Existing strategies were also optimised.<br />
That allows <strong>Aquafin</strong> to stay within the 35% to 50% range.<br />
Half of the returns from the interest-rate management are<br />
deducted immediately from the invoice to the drinking-water<br />
companies. The other half is retained within the company as<br />
a buffer for possible optimisations. At the end of the year,<br />
the global result of all of the hedging operations combined is<br />
reviewed so that every euro placed in the buffer is deducted<br />
from the invoice to the drinking-water companies.
Expansion of the wastewater treatment<br />
infrastructure for the Flemish Region<br />
During <strong>2011</strong>, we brought the people who were working on<br />
the Vision creation of the network, the Accelerated Execution<br />
of Projects and Account Management together into business<br />
units. In doing that, we prepared our core processes for<br />
future growth. In spite of the internal focus, a large number<br />
of projects for expanding the treatment infrastructure in<br />
Flanders were carried out. When we look at all of the contract<br />
amounts for the region and for client municipalities<br />
combined, <strong>2011</strong> was even one of the best years ever. We expect<br />
that working in business units will really start to pay off in<br />
2012, so that we can develop, execute and finish projects<br />
completely in accordance with our own high quality standards<br />
and we can also deliver the results that the clients want.<br />
On 31 December <strong>2011</strong>, the investment-project order<br />
portfolio for the Flemish Region amounted to more than<br />
€1.3 billion for 1,316 projects. Up until that date, <strong>Aquafin</strong> had<br />
delivered 2,268 new-build and renovation projects worth<br />
nearly €3 billion.<br />
VALUE PROJECT PORTFOLIO<br />
n<br />
In design phase:<br />
€934.03 mio<br />
n<br />
Delivered<br />
€2,964.21 mio<br />
Last year, we developed a multilateral agreement for<br />
study contracts. That way, we want to expand a long-term<br />
relationship with high-quality study bureaus and we can reserve<br />
capacity in the market without disrupting it. The agreement<br />
should also reduce the time required to award contracts.<br />
The call for candidates has gone out.<br />
The business units will also intensify the cooperation with<br />
the operational teams and lead to treatment areas that<br />
function optimally. The regional engineers within the Vision<br />
creation process will play a particularly important role in our<br />
asset management.<br />
n<br />
Increased tendering volumes<br />
In <strong>2011</strong>, <strong>Aquafin</strong> put projects worth €154 million out to<br />
tender for the Flemish Region. That is €3 million more than in<br />
2010. The target of €160 million was adjusted to €157 million<br />
based on the actual prices that the contractors submitted<br />
during the project tender process. Ninety-eight per cent of<br />
that amount has been achieved. With the Urban Waste<br />
Water Directive having been nearly completely implemented,<br />
the projects that remained to be tendered were relatively<br />
small. Such projects demand a lot of technical and<br />
administrative monitoring, but each one of them contributes<br />
individually to the global tendering volumes. For 2012,<br />
the target has been set at €183 million, on the assumption that<br />
that objective fits within the budgets of the Flemish Region.<br />
n<br />
n<br />
Awarded and<br />
contracted out:<br />
€403.51 mio<br />
Vision development concerning the expansion and<br />
management of the wastewater treatment infrastructure<br />
In hydraulic studies, the physical parameters of the system<br />
are registered and formalised. In <strong>2011</strong>, <strong>Aquafin</strong> delivered<br />
36 hydronaut studies worth a total of more than €3 million.<br />
Twenty-five of those were needed for the expansion of the<br />
sewer system. The other 11 studies were intended to increase<br />
the knowledge about the wastewater treatment areas.<br />
For all agglomerations, a determination has been<br />
made of the water-treatment infrastructure that is<br />
a priority in order to comply with the Urban Waste<br />
Water Directive. In municipalities of greater than<br />
10,000 people equivalents, all of the treatment plants<br />
have been delivered. All of the collector sewers have<br />
already been put into use, but three projects are still to<br />
be delivered. At the beginning of 2012, in agglomerations<br />
of between 2,000 and 10,000 people equivalents, only<br />
one treatment plant – in Melsbroek – was still missing.<br />
That plant will become operational in the course of<br />
2012. The remaining 13 priority collector sewers are all<br />
in progress.<br />
Report of the Board of Directors<br />
7
8<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
TENDER RHYTHM<br />
mio EURO<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
DELIVERING RHYTHM<br />
mio EURO<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
2003 2004 2005 2006 2007 2008 2009 2010 <strong>2011</strong><br />
0<br />
2004 2005 2006 2007 2008 2009 2010 <strong>2011</strong><br />
n <strong>Aquafin</strong> n Other parties<br />
n Budget n Total<br />
By cooperating with municipalities and supramunicipalities,<br />
the amount that <strong>Aquafin</strong> executed for the Region rose from<br />
€154 million to €250 million.<br />
For the tendering of commercial projects, <strong>2011</strong> was a top<br />
year, with a total amount of more than €45 million. Both types<br />
of projects combined give one of the highest tendering<br />
volumes ever for projects for the expansion and optimisation<br />
of the treatment infrastructure in Flanders.<br />
n<br />
Just as many projects completed, but fewer delivered<br />
In <strong>2011</strong>, <strong>Aquafin</strong> delivered projects worth a total of<br />
€146 million for the Flemish Region. We executed projects<br />
worth €158 million, in accordance with the agreed target,<br />
but due to formal shortcomings in our delivery dossiers,<br />
the client only considered €146 million in projects as having<br />
been delivered. All of the treatment infrastructure built was<br />
put into service though and the formal aspects in the<br />
remaining dossiers were corrected early in 2012.<br />
In <strong>2011</strong>, 13 wastewater treatment plants were delivered:<br />
in Engsbergen, Sint-Joris-Winge, Kemmel, Vissenaken,<br />
Wetteren-Westrem, Kruiseke, Bavegem, Heldergem, Oplinter,<br />
Asse-Bekkerzeel, Duffel-Mijlstraat, Hoepertingen and Geetbets.<br />
Four treatment plants were renovated. Those plants are in<br />
Sint-Armands, Heist, Bocholt and Itegem.<br />
To transport the wastewater to the treatment<br />
plants, <strong>Aquafin</strong> laid 171 km of additional pipelines<br />
and put 55 pumping stations into operation. By the<br />
end of <strong>2011</strong>, <strong>Aquafin</strong> had a total of 256 treatment<br />
plants, 1,252 pumping stations and 4,914 km of<br />
pipelines under management. Of those pipelines,<br />
3,734 km were laid by <strong>Aquafin</strong>. The remaining 1,180 km<br />
is infrastructure that was taken over.<br />
The delivery target for 2012 amounts to €183 million,<br />
subject to the budgets and resources required being approved.<br />
This target has not been that high for more than 10 years.<br />
The targets for the commercial projects on behalf of the<br />
municipalities are also getting higher every year.
WATER TREATMENT IN FLANDERS IS NEARLY AT THE LEVEL OF<br />
THE NEIGHBOURING COUNTRIES<br />
Before the establishment of <strong>Aquafin</strong>, barely 28% of<br />
the household wastewater in Flanders was being treated.<br />
Twenty years on, the gap in the degree of treatment<br />
between the different basins is clearly narrowing and<br />
the total amount of treated water has more than doubled<br />
to 80%. That means that the Region is approaching the<br />
treatment levels of the neighbouring countries.<br />
Our neighbours began implementing the Urban Waste<br />
Water Directive in 1991 with a much higher level of<br />
treatment than Flanders: 94% in the Netherlands, 69% in<br />
France, 83% in the United Kingdom and 86% in Germany.<br />
Today, the treatment level in these countries is 5% to 14%<br />
higher, while Flanders made progress of 52% during that<br />
period. In absolute figures, there were more inhabitants<br />
connected over the past 20 years in the neighbouring<br />
countries, of course, but we are nevertheless proud of the<br />
results achieved.<br />
The progress that has been made is especially<br />
noteworthy because it is more complex in Flanders to<br />
expand the treatment infrastructure required than it is in<br />
the neighbouring countries.<br />
That is because of our high degree of ribbon<br />
construction. Germany and the Netherlands, for example,<br />
have very highly concentrated residential cores, making it<br />
possible to connect hundreds of thousands of residents<br />
to a single treatment plant with a limited number of<br />
pipelines. In Flanders, many more collector sewers and<br />
more small sewage works are needed to connect the same<br />
number of inhabitants. In terms of the process technology,<br />
those small works are also more complex.<br />
With respect to the quality of the household waste<br />
water treated, Flanders is already a leader in Europe.<br />
Our treatment plants are at the top of the league tables<br />
with respect to eliminating the waste flows delivered.<br />
England and Wales may well be able to show treatment<br />
percentages of 97%, for example, but only half (47%) of<br />
the treatment plants remove the nutrients nitrogen and<br />
phosphor. Several years ago, that percentage was only<br />
42% of the plants in France.* In Flanders, on the other<br />
hand, nutrients are removed from 98% of the sewer water<br />
that is connected to the treatment infrastructure.<br />
* Source: Eurostat.<br />
Report of the Board of Directors<br />
9
10<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Management of the wastewater treatment<br />
infrastructure for the Flemish Region<br />
In <strong>2011</strong>, <strong>Aquafin</strong> achieved the best treatment results for<br />
the household wastewater ever. Those good results are partly<br />
due to the weather, but our good process management was<br />
the decisive factor.<br />
The effluent results of <strong>2011</strong> were evaluated for 249 wastewater<br />
treatment plants (WWTPs). Those are the watertreatment<br />
plans that the Flemish Region entrusted the<br />
operation of to <strong>Aquafin</strong> in 1994 and the plants that <strong>Aquafin</strong><br />
built itself and delivered to the Flemish Region and that<br />
the Flemish Environmental Agency currently has an inspection<br />
programme for.<br />
RECORD NUMBER OF TREATMENT PLANTS<br />
COMPLIED WITH ALL OF THE STANDARDS<br />
One water-treatment plant (light blue bar in the graph)<br />
did not satisfy the effluent standards of the European Urban<br />
Waste Water Directive. Until April 2004, the same standards<br />
were also the sector standards for the Flemish Region.<br />
The Jabbeke WWTP did not comply because of too many slight<br />
standard overruns for BOD and COD. The plant also did not<br />
achieve the mandatory elimination percentage for those<br />
parameters and for suspended solids.<br />
Two other treatment plants were only not compliant<br />
because of the stricter standards of the VLAREM amendment.<br />
They are shown in the graph with a middle blue bar.<br />
The Lede WWTP came up 4% short from achieving the<br />
mandatory elimination percentage for nitrogen. The annual<br />
average for phosphor for the Eksel WWTP was 0.1 mg/l<br />
too high.<br />
In <strong>2011</strong>, 246, or 98.8% of all plants, were compliant with the<br />
emission limits imposed (orange bar in the figure). The graph<br />
shows the development for the last ten years only, but there is<br />
no doubt that these are the best effluent results since <strong>Aquafin</strong><br />
was founded.<br />
EVALUATION OF THE WASTEWATER TREATMENT PLANTS<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
0%<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 <strong>2011</strong><br />
n Complying with all standards<br />
n Non-compliant with the stricter Flemish standards of the “Vlarem Kleine Trein”<br />
n Non-compliant with the 2003 standards
LARGEST AMOUNT OF NUTRIENTS<br />
EVER SUPPLIED AND ELIMINATED<br />
The average elimination percentage has been stable for<br />
several years for BOD (98%), COD (90%) and suspended solids<br />
(96%). In 1995, the Flemish government adopted a standard<br />
of 75% for nitrogen and phosphorus for all of the public<br />
wastewater treatment plants combined. Those targets were<br />
also more than achieved in <strong>2011</strong> with 82% for nitrogen and<br />
86% for phosphorus. <strong>2011</strong> was a top year with new record<br />
elimination percentages for all of the parameters. Furthermore,<br />
there have never been such large volumes of phosphor and<br />
nitrogen delivered and eliminated.<br />
An inhabitant would, according to an EPAS study<br />
commissioned by the Vlaamse Milieumaatschappij (Flemish<br />
Environmental Agency), not discharge 54 g BOD per day,<br />
but only 44 g. Later studies by EPAS gave an average BOD load<br />
of only 38 g per inhabitant. If the number of connected people<br />
equivalents (PE) is determined on the basis of 44 g/PE/day,<br />
then the result for BOD is also 4.7 million PE. During the<br />
transportation of wastewater, no nutrient removal occurs.<br />
Organic nitrogen is certainly bacterially converted to ammonia,<br />
but this does not reduce the total nitrogen load. The over -<br />
estimate for nutrients can be explained by nutrient-rich seepage<br />
or discharged ground water and water from connected canals.<br />
ONCE AGAIN MORE POLLUTANT LOAD<br />
DELIVERED AND BIOLOGICALLY PROCESSED<br />
The measured pollutant loads that are delivered to the<br />
treatment plants can be expressed in terms of the number of<br />
inhabitants that are already connected to the wastewater<br />
treatment infrastructure. Flanders Region has more than<br />
6.25 million inhabitants. With the treatment levels amounting<br />
to approximately 80% in <strong>2011</strong>, there are theoretically 4.9 million<br />
residents connected to the collective wastewater treatment.<br />
If the Flemish households whose wastewater is treated in the<br />
two Brussels waste water treatment plants are deducted from<br />
that total, this gives a total of 4.8 million people whose<br />
pollutant load is assumed to be connected to the <strong>Aquafin</strong><br />
wastewater treatment plants. The pollutant loads of the<br />
businesses that are connected to the collective treatment<br />
system have not been included in that count.<br />
For the design of wastewater treatment plants, the<br />
calculations take account of the theoretical daily pollutant<br />
load of each Flemish resident: 54 g BOD, 135 g COD, 90 g<br />
suspended solids, 10 g nitrogen and 2 g phosphorus. If we<br />
calculate the pollutant loads that were delivered in <strong>2011</strong> on the<br />
basis of these quantities, then there is currently a pollutant<br />
load for 4.7 million inhabitants being delivered (average of<br />
the estimates on the basis of the 5 parameters). The data<br />
on nutrients give an overestimate, the data on BOD and<br />
suspended solids reveal an underestimate. Those figures are<br />
accurate in terms of size with the pollutant loads that should<br />
theoretically arrive at the water treatment plants.<br />
There are two explanations for the underestimate on the<br />
basis of the BOD data. Measurements conducted on the sewer<br />
system in Tielt showed a decrease in the BOD concentration<br />
of 18% as a consequence of biodegradation: micro-organisms<br />
break down the BOD in the sewer. Moreover the assumed<br />
theoretical daily pollutant load also seems to be incorrect.<br />
BENCHMARKS CONFIRM GOOD<br />
OPERATIONAL APPROACH<br />
In <strong>2011</strong>, <strong>Aquafin</strong> again took part in two international<br />
benchmarks, the results of which were in line with<br />
expectations. Participation in such exercises is also<br />
interesting because it offers possibilities for<br />
exchanging knowledge with the other participants.<br />
The first study was carried out by the European<br />
Benchmarking Cooperation, a not-for-profit organisation<br />
that compares the performance of (waste) water<br />
companies. Twenty-eight wastewater operators, most<br />
of them European, took part in their most recent project.<br />
The exercise showed that <strong>Aquafin</strong> is maintaining<br />
a very high investment level in comparison with<br />
the other companies. Our personnel cost per treated<br />
cubic meter of wastewater was among the lowest.<br />
That means that we work efficiently, especially given<br />
the high labour costs in Belgium.<br />
The second study was organised by the German<br />
Aquabench, an organisation that is comparable to<br />
the EBC, but then specifically for German (waste) water<br />
companies. Eight wastewater treatment operators<br />
of varying sizes participated. As the only foreign<br />
participant in this exercise, <strong>Aquafin</strong> once again scored<br />
well in terms of operations, in our cost per treated<br />
people equivalent. <strong>Aquafin</strong>'s were approximately<br />
20% lower than with other participants, partly due to<br />
different local conditions. The figures showed clearly<br />
that our plants were running at high utilisation levels<br />
vis-à-vis their design capacity. In terms of the use of<br />
electrical energy, we scored average. The German<br />
companies did score considerably higher in terms of<br />
production of green energy, which is largely due to<br />
other influent composition and more possibilities in<br />
terms of co-digestion.<br />
Report of the Board of Directors<br />
11
12<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
REMOVED POLLUTANT LOAD AND TREATMENT EFFICACY OF WASTEWATER TREATMENT PLANTS<br />
n<br />
Biological oxygen demand<br />
n<br />
Suspended solids<br />
75<br />
100<br />
120<br />
100<br />
Removed waste load<br />
(1,000 tonnes/year)<br />
70<br />
65<br />
60<br />
95<br />
90<br />
85<br />
Removal percentage<br />
Removed waste load<br />
(1,000 tonnes/year)<br />
110<br />
100<br />
90<br />
95<br />
90<br />
85<br />
Removal percentage<br />
55<br />
80<br />
80<br />
80<br />
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11<br />
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11<br />
n<br />
Chemical oxygen demand<br />
n<br />
Nitrogen<br />
200<br />
100<br />
20<br />
85<br />
190<br />
95<br />
18<br />
80<br />
Removed waste load<br />
(1,000 tonnes/year)<br />
180<br />
170<br />
160<br />
90<br />
85<br />
Removal percentage<br />
Removed waste load<br />
(1,000 tonnes/year)<br />
16<br />
14<br />
12<br />
75<br />
70<br />
65<br />
Removal percentage<br />
150<br />
80<br />
10<br />
60<br />
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11<br />
8<br />
55<br />
n<br />
Phosphorus<br />
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11<br />
Removed waste load<br />
(1,000 tonnes/year)<br />
3,2<br />
2,8<br />
2,4<br />
2,0<br />
90<br />
85<br />
80<br />
75<br />
70<br />
Removal percentage<br />
The graphs show the removed pollutant load of all of<br />
the wastewater treatment plants combined, as well as the<br />
elimination percentage. Per measured parameter (BOD, COD,<br />
suspended solids, nitrogen and phosphorus) the difference is<br />
determined between the biologically treated pollutant load<br />
and the residual pollutant load that is discharged after<br />
biological treatment. The different is the removed pollutant<br />
load, expressed in 1,000 tonnes/year. The removal percentage<br />
is the equivalent to the pollutant load removed during the<br />
biological treatment, divided by the total biologically treated<br />
pollutant load.<br />
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11<br />
n<br />
Removed waste load<br />
l<br />
Removal percentage
STANDARDS FOR TREATED DOMESTIC WASTEWATER<br />
The treated waste water (effluent) must meet certain<br />
standards, which depend on the size of the agglomeration<br />
for which the plant was built. Up to 2004 these norms<br />
were a copy of the European standards, imposed via<br />
the European Urban Wastewater Directive. At the Flemish<br />
level they were made stricter by a Vlarem amendment<br />
during 2004 and 2006. <strong>Aquafin</strong> monitors five parameters:<br />
biological oxygen demand (BOD), chemical oxygen<br />
demand (COD), total nitrogen, total phosphorus and<br />
suspended solids. The biological oxygen demand indicates<br />
how much oxygen bacteria need to be able to break down<br />
the organic pollutant load in 5 days’ time at 20° C in 1 litre<br />
of treated wastewater.<br />
When BOD values are high the bacteria develop so fast<br />
that there is a risk that through their respiration all oxygen<br />
in the water will be used. The chemical oxygen demand<br />
indicates how much oxygen is needed to fully oxidize<br />
the pollutant load present. The parameter suspended solids<br />
provides a measure for the suspended (non-dissolvable)<br />
solids that may remain in the treated wastewater.<br />
Too much nitrogen and phosphorus in the water produces<br />
an explosive algae growth. At night, these algae remove<br />
oxygen from the water creating difficulties for fish, aquatic<br />
plants and other organisms.<br />
Services beyond the scope of the agreement<br />
with the Flemish Region<br />
The Minister of the Environment encourages <strong>Aquafin</strong> to<br />
valorise its expertise with the municipalities and industry in<br />
Flanders as well as abroad. Thanks to the custom work that<br />
we do for our clients, we have become the biggest player in<br />
the municipal segment. Cities and smaller municipalities are<br />
increasingly choosing an agreement with <strong>Aquafin</strong>, sometimes<br />
in conjunction with a drinking water company. <strong>Aquafin</strong>'s<br />
subsidiary Aquaplus has become well-known in Belgium over<br />
the past year for the operation of industrial water treatment.<br />
Outside Belgium, we have cast our net further with the<br />
establishment of ASEWater Technologies, a joint venture with<br />
a partner from India.<br />
RELIABLE PARTNER FOR THE EXPANSION<br />
AND MANAGEMENT OF THE MUNICIPAL<br />
WATER-TREATMENT INFRASTRUCTURE<br />
In order to comply with the Water framework directive,<br />
the municipalities are expecting capital spending in the<br />
amount of nearly €7 billion. Part of that (€0.7 billion) has been<br />
taken over by the Region via the Local Pact with the<br />
municipalities. But the remaining projects still require massive<br />
capital investments, for most of which the municipalities<br />
do not have the required technical expertise in-house.<br />
Since the end of 2004, <strong>Aquafin</strong> has been permitted to<br />
compete with the other sewer operators in the municipal<br />
market. Municipalities may choose for a direct concession<br />
agreement with <strong>Aquafin</strong> or join one of the cooperative<br />
ventures that <strong>Aquafin</strong> has entered into with Vivaqua,<br />
VMW (RioAct and Rio-P) and TWVW and AWW (rio-link).<br />
In March, <strong>Aquafin</strong> joined rio-link by acquiring one third<br />
of the shares. The other shares are held by water-link cvba.<br />
In that way, the previous cooperation between AWW and<br />
<strong>Aquafin</strong> (under the RI-ANT name) can be valorised further<br />
within rio-link.<br />
Operationally, rio-link works in two business units, with the<br />
unit in Antwerp being responsible for sewage management<br />
of the sanitation partners of AWW and the team in Ghent for<br />
the sanitation partners of TMVW.<br />
In <strong>2011</strong>, one new concession started up and three<br />
municipalities decided to take out expanded Rio-Totaal contracts<br />
with different modules. Three municipalities joined RioAct and<br />
two municipalities joined Rio-P. One municipality ended its<br />
collaboration with <strong>Aquafin</strong>. At the beginning of 2012, 87 cities<br />
or smaller municipalities had entered into a contract with<br />
<strong>Aquafin</strong>, either directly or in combination with another party.<br />
Report of the Board of Directors<br />
13
14<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
We have seen strong growth in the number of tenders and<br />
deliveries both in our own concessions and in our cooperative<br />
links. An increasing number of projects in progress are also<br />
resulting from our own proposals for renovation, optimisation<br />
or connection of remaining drainage points. We expect<br />
that turnover in the municipal market will increase further<br />
over the next few years, even though that volume will not<br />
be significant in comparison with the turnover from our<br />
regional contract.<br />
By bundling the process of Vision creation, Accelerated<br />
execution of projects, and Account management into business<br />
units in <strong>Aquafin</strong>, we shall undoubtedly be better able to satisfy<br />
the desires that our clients have.<br />
SUPPORT FOR INDUSTRY AND FOREIGN<br />
PROJECTS VIA AQUAPLUS<br />
Aquaplus NV, the commercial subsidiary of <strong>Aquafin</strong>,<br />
concentrates on industrial requirements in Belgium.<br />
Abroad Aquaplus assists to governments, administrations<br />
and companies in achieving their environmental norms.<br />
Aquaplus offers customised solutions for all stages within<br />
the wastewater cycle.<br />
Aquaplus has some good contracts in Flanders that link<br />
to the core activities of <strong>Aquafin</strong>. Over the past few years, the<br />
primary growth was taking place in large operating contracts<br />
for companies. The Flemish Region had clearly asked <strong>Aquafin</strong><br />
to apply its knowledge and experience abroad as well, however.<br />
Aquaplus itself does not have enough brand-awareness or<br />
<strong>financial</strong> resources to be able to attract and execute large<br />
projects. Usually, our subsidiary has a role as a subcontractor<br />
to apply specific knowledge in foreign projects. Aquaplus is<br />
now walking a second path, though. November <strong>2011</strong> saw the<br />
christening of ASEWater Technologies, a joint venture between<br />
Aquaplus and the India-Belgium company ASE Structure<br />
Design. Thanks to that cooperation with a foreign partner,<br />
which is solidly anchored in the local market, Aquaplus<br />
expects to be able to avoid those obstacles and penetrate<br />
a large sales market. The company will be presenting itself as<br />
an Indian company with European expertise.<br />
PROTOCOL FOR COMMERCIAL CONTRACTS<br />
In <strong>2011</strong>, <strong>Aquafin</strong> signed a protocol with the Flemish Region<br />
that determines the conditions under which <strong>Aquafin</strong> is<br />
permitted to provide personnel and resources to Aquaplus<br />
and for municipal contracts. That protocol provides clarity<br />
for both parties.<br />
Research and product development<br />
<strong>Aquafin</strong>'s research activities help to make it possible to<br />
offer customised sustainable technological solutions to our<br />
clients. <strong>Aquafin</strong> is considered to be the leading technical<br />
expert in Flanders with respect to the complete wastewater<br />
cycle. The immediately usable research that <strong>Aquafin</strong> conducts<br />
concentrates on cost-control, guaranteeing the effluent<br />
standards and introducing the best available technologies.<br />
The strategic research is grouped around the theme areas<br />
of climate change, integrated water management and asset<br />
management of the (sewer) infrastructure.<br />
IMMEDIATELY USABLE RESEARCH<br />
With Aqua3M, our proprietary dynamic water-treatment<br />
modelling system, proposals were made in <strong>2011</strong> to make the<br />
operations at six treatment plants more sustainable. The same<br />
exercise was done for a foreign client of subsidiary company<br />
Aquaplus.<br />
The Flemish Region (CIW) called on our knowledge and<br />
experience with integrated detail modelling of our hydraulic<br />
experts in the context of the review of the Code of Good<br />
Practice for the design of a sewage system. We have also taken<br />
great steps in the implementation of real-time control of<br />
the sewage system in the Kessel-lo study area. Over the course<br />
of the year, a new methodology for corrosion protection<br />
was implemented and validated in several test cases.<br />
The Aqua3S platform for dynamic modelling of the<br />
formation of sulphides in sewage systems is ready for<br />
validation based on the measurement results. A new<br />
automated clearing programme for sewers was also<br />
implemented last year.
STRATEGIC RESEARCH<br />
In <strong>2011</strong>, <strong>Aquafin</strong> was active in five research projects with<br />
external partners. Sewage+ is a Flemish research project<br />
financed as part of MIP2 and coordinated by Vito. The aim is<br />
to develop new concepts in water treatment to achieve<br />
maximum energy recovery, such as by mixing household<br />
wastewater with concentrated waste flows. Four projects are<br />
being financed by Europe and were started up last year.<br />
In a municipal environment, the heat that is still present in<br />
the sewage can be profitably put to use. As part of the INNERS<br />
project, <strong>Aquafin</strong> is helping to study the potential benefits<br />
for the environment of an application at large scale.<br />
Minotaurus is testing new technologies for eliminating<br />
organic polluting substances from wastewater, ground water<br />
and the soil. In the future, the standards that the treated<br />
water will have to comply with will only become more strict.<br />
Sanitas wants to minimise the impact of urban water systems<br />
on climate change and deal with future variations in water<br />
quantity and quality. Raingain looks at the availability of<br />
detailed precipitation and flooding data. That should make it<br />
possible for operational water managers in the city to respond<br />
adequately to heavy precipitation and to prevent damage due<br />
to flooding.<br />
MEMBRANE EXPERT<br />
With the rise of membrane technologies,<br />
<strong>Aquafin</strong> carried out extensive pilot studies, followed<br />
quickly the first operational membrane bio-reactor in<br />
the Benelux. That technology is now being used to<br />
treat the wastewater at several large and small plants.<br />
Based on our experience, we developed our own<br />
hybrid treatment process, with a demonstration<br />
installation at the Aartselaar water treatment plant.<br />
The <strong>Aquafin</strong> concept is distinguished from other<br />
concepts by using only one common bio-reactor and<br />
because the process control is based on whether there<br />
is precipitation. That makes it ideal for expanding the<br />
capacity of traditional activated sludge system where<br />
little extra space is available.<br />
Major risk factors<br />
This section gives an overview of developments in the areas<br />
that include any risk to the company.<br />
LEGAL DISPUTES<br />
n<br />
Flooding in a residential area<br />
This dossier deals with water damage suffered by<br />
approximately four hundred residents of a residential<br />
neighbourhood in 1998. At the end of 2010, the court made<br />
a ruling that was favourable to <strong>Aquafin</strong>, with the majority of<br />
the claims having lapsed, or being ruled to be inadmissible or<br />
unfounded. The plaintiffs filed an appeal against that ruling<br />
in April <strong>2011</strong>. The aforementioned developments do not give<br />
any cause for changing the previous decision of not making<br />
any provision in this matter.<br />
INSURANCE CLAIMS<br />
n<br />
Insufficient concrete reinforcement at the Deurne WWTP<br />
In 2007, it was discovered that, due to a design error at the<br />
water treatment plant in Deurne, the walls of certain aeration<br />
basins were not reinforced adequately. According to <strong>Aquafin</strong>,<br />
that damage claim is partially covered by our ABR (all<br />
construction risks) insurance policy and largely by the<br />
professional liability insurance policy of the study firm<br />
concerned. In 2008, an investigation was held with regard to<br />
a suitable repair method, the most obvious repair period and<br />
a suitable contractor. Repair work started effectively in 2009.<br />
The work has largely been completed at the time of writing.<br />
The requests for repayment of the repairs costs, that have<br />
been submitted thus far, were effectively compensated by<br />
the ABR insurance company.<br />
Report of the Board of Directors<br />
15
16<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
In <strong>2011</strong>, the amount not paid out by the ABR insurer was<br />
partly recovered from the study bureau that made the design<br />
error and partly from the inspection body that was active on<br />
the job site. Those recovery procedures are ongoing. For the<br />
part not paid by the ABR insurer, a provision has been made as<br />
a precaution.<br />
n<br />
Problems with concrete at the Bruges WWTP<br />
During the provisional delivery of the renovated waste -<br />
water treatment plant in Bruges, an outline of the armouring<br />
in the concrete was detected in one of the aeration basins.<br />
It was determined later that the damage continued to spread,<br />
and not only in this basin. An analysis commissioned by<br />
<strong>Aquafin</strong> identified two causes: insufficient concrete coverage<br />
and increased chloride values. A repair methodology was<br />
devised in consultation with the contractor. Where necessary,<br />
the concrete has to be repaired and augmented. Additionally,<br />
cathodic protection also has to be implemented.<br />
The actual repairs were carried out over the past few years<br />
and are continuing in 2012. The costs of the first part of<br />
the repairs referred to were borne by the contractor, the costs<br />
for the last part by <strong>Aquafin</strong>. A settlement has been reached<br />
between the insurance company and the policyholders and<br />
between the policyholders themselves. The ABR insurance<br />
company, ACI, paid out a substantial amount. That amount<br />
covered the repair and protection measures already taken<br />
and will also cover the costs of the work that is still to<br />
be done. In this dossier, the facts don’t show the necessity<br />
of making provisions.<br />
FINANCIAL REPORTING<br />
Inasmuch as the methodology of the management<br />
agreement provides for a posteriori approval of <strong>Aquafin</strong>'s<br />
annual <strong>financial</strong> report, the possibility that some compensations<br />
may not ultimately be approved by the Flemish Region cannot<br />
be discounted entirely.<br />
The most important developments after<br />
the close of the <strong>financial</strong> year<br />
APPROVAL OF THE OPTIMISATION<br />
PROGRAMME 2013<br />
On 16 December <strong>2011</strong>, the Flemish Government again set<br />
the budget for the expansion of the supramunicipal<br />
water-treatment infrastructure for programme year 2013 at<br />
€250 million. On 31 January 2012, the assignment to<br />
implement that programme was presented to <strong>Aquafin</strong> by<br />
the Flemish Minister of the Environment Joke Schauvliege.<br />
The optimisation programme 2013 provides for a budget<br />
for 134 new projects and 21 projects that have been moved<br />
into this programme. In addition, the study work only<br />
(preparation of the technical plan) was assigned for 10 projects.<br />
The initial estimates for those projects amount to €112 million,<br />
€74 million of which has been designated for capital spending<br />
under the local pact with the municipalities.<br />
To cope with future price increases for those projects,<br />
€88 million has been reserved. In this programme, the<br />
remaining €50 million has been explicitly allocated to cover<br />
the overruns of the investment and renovation programme<br />
from previous programme years.<br />
The optimisation programmes are being drawn up by<br />
the Vlaamse Milieumaatschappij (Flemish Environmental<br />
Agency), in consultation with <strong>Aquafin</strong>, the provinces and<br />
the basin administrators. They include projects that focus on<br />
the additional sanitation of various discharge locations,<br />
the construction of small-scale wastewater treatment works<br />
and the construction of strategic rainwater piping to improve<br />
the existing infrastructure. When choosing the projects,<br />
attention is given to their ecological and economical<br />
profitability.
Comments with regard to the consolidated<br />
balance sheet<br />
At the end of the <strong>financial</strong> year, the balance sheet total<br />
amounted to €2,296 million, which is €425 million higher than<br />
the last <strong>financial</strong> year.<br />
That increase is largely due to the growth of the long-term<br />
receivables in the context of the management agreement.<br />
This increase of those receivables is due to a net growth<br />
of investments in the water treatment infrastructure, which<br />
have been carried out at the order of the Flemish Region.<br />
In <strong>2011</strong>, for example, investment and optimisation projects of<br />
a total contracting value of nearly €146 million were delivered.<br />
On the other hand, <strong>Aquafin</strong> bought plants from the Vlaamse<br />
Milieumaatschappij (Flemish Environmental Agency) in <strong>2011</strong>,<br />
for nearly €154 million as part of the implementation of<br />
addendum No. 7 to the management agreement. All of the<br />
plants remain the property of <strong>Aquafin</strong> until the end of the<br />
management agreement with the Flemish Region. The assets<br />
under construction, which saw growth of 8% to €271 million in<br />
<strong>2011</strong>, are part of those receivables.<br />
The compensations that are yet to be invoiced for work<br />
outside the management agreement are included under<br />
the other <strong>financial</strong> assets. The increase in that entry is<br />
the result of the increased construction activity for similar<br />
'commercial' projects.<br />
In <strong>2011</strong>, <strong>Aquafin</strong> found itself facing greater financing<br />
requirements than it had in previous years due to the<br />
purchase of property and plants of the VMM in the context<br />
of addendum no. 7 of the management agreement. The banks<br />
were limited in their ability to provide additional loans<br />
because they were themselves confronted with increased<br />
costs and new regulations. Belgian institutional investors,<br />
on the other hand, were very interested in financing <strong>Aquafin</strong>.<br />
That opportunity was therefore utilised to the full: €285<br />
million in financing was obtained via that channel. Inasmuch<br />
as it was not possible to apply that full amount to financing<br />
projects immediately, there was a temporary cash surplus and<br />
investments of nearly €53 million were made. In 2012, those<br />
funds are to be used to finance projects.<br />
The provision for risks and charges relates to legal disputes,<br />
insurance dossiers, disputes in the context of the execution<br />
of the management agreement, and processing the sludge<br />
buffered in the plants.<br />
Long-term financing is based on the allocation agreement.<br />
It stipulates that the balance of the long-term credits must be<br />
smaller than the future claims that <strong>Aquafin</strong> has on the drinking<br />
water companies and the Flemish Region, respectively.<br />
These claims consist of the parts of the investment projects<br />
that have not been paid, but that have already been delivered.<br />
At the end of <strong>2011</strong>, this sum amounted to €1,495 million.<br />
In <strong>2011</strong>, <strong>Aquafin</strong> had taken up €510 million in long-term credits,<br />
€75 million of which was with the European Investment Bank,<br />
€150 million with commercial banks, and €285 million with<br />
institutional investors. Taking the repayment of loans that had<br />
already been taken up into account, the balance of the longterm<br />
bank debt under affectation amounts to €1,459 million,<br />
nearly €157 million of which must be repaid within the year.<br />
At the end of <strong>2011</strong>, short-term financing had been reduced<br />
sharply due to the long-term financing of the VMM assets<br />
purchased. In the past book year, there was a decrease in shortterm<br />
financing via commercial paper, from €140.6 million at<br />
the end of 2010 to €73.0 million at the end of <strong>2011</strong>.<br />
<strong>Aquafin</strong> has a credit line of €180 million, including the<br />
syndicated loan for the short-term financing of activities in<br />
the context of the management agreement. None of the<br />
credit line was taken up by the end of <strong>2011</strong>. <strong>Aquafin</strong> has a credit<br />
line of €17 million available for the short-term financing of<br />
municipal projects. Of that amount, €9 million was taken up<br />
by the end of <strong>2011</strong>.<br />
<strong>Aquafin</strong> uses derivatives to hedge interest risks arising<br />
from the financing activities. The (negative) market value of<br />
the hedging structures is included under the other long-term<br />
<strong>financial</strong> liabilities.<br />
In the context of the financing for the aforementioned<br />
purchase of plants from the VMM, the capital was increased<br />
by €50 million on 13 December <strong>2011</strong>. Of that amount, €12.5<br />
was deposited.<br />
Report of the Board of Directors<br />
17
18<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Comments on the consolidated profit and loss<br />
<strong>statement</strong> and the overview of realised<br />
and unrealised results<br />
The management contract with the Flemish Region<br />
stipulates that the compensation of <strong>Aquafin</strong> will take place<br />
on the basis of passing on all reasonable costs, increased by<br />
a compensation for the shareholders that is based on their<br />
contribution to the company’s equity capital. From this, it follows<br />
that to a large extent the costs and revenues are a reflection<br />
of each other.<br />
The increase in costs, and in particular the costs of raw<br />
materials and additives, services and various goods, and<br />
personnel costs is in line with the growth of the infrastructure<br />
that is being operated and extended by <strong>Aquafin</strong>, both within<br />
and outside the management agreement.<br />
The part of the income tax that relates to the activities<br />
under the Management Agreement can be charged to the<br />
drinking water companies as a reasonable cost.<br />
The biggest part of the changes to the market value of<br />
the hedging structures over <strong>2011</strong> – the part that relates to<br />
the qualifying cash-flow hedges – is included in the overview<br />
of the realised and unrealised results. Inasmuch as <strong>Aquafin</strong><br />
is entitled under the management agreement to receive<br />
compensation for the costs of financing, changes in<br />
the market value of the <strong>financial</strong> instruments are recognised<br />
as receivables vis-à-vis the unrealised results.<br />
The major increase in financing through borrowing resulted<br />
in an increase of the costs of debt by €7.3 million in comparison<br />
with the <strong>financial</strong> year 2010. On the other hand, some of the<br />
change to the market value of the hedging structures over <strong>2011</strong><br />
has been included in the profit and loss <strong>statement</strong>.<br />
With the active management of the interest risk, <strong>Aquafin</strong><br />
wishes to optimise the financing costs. Since 2006, the Board<br />
of Directors has approved the implementation of the dynamic<br />
management of the interest risk, with the outlines for interest<br />
management being defined.<br />
After booking the provisions, the value depreciation, the costs<br />
not passed on to the Flemish Region and the revenues, and<br />
with the inclusion of the results of the commercial activities,<br />
profits before taxes amount to €8.03 million.<br />
Starting with tax year 2007, the concept of notional<br />
interest deduction was introduced in the corporate tax, so that<br />
the cost of wastewater treatment is limited for residents.<br />
Also the application of the increased investment deduction<br />
for energy-saving and environmentally friendly investments<br />
for Research and Development has a favourable effect on<br />
the corporate tax.
Report of the Board of Directors<br />
19
20 <strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong>
<strong>Consolidated</strong> <strong>financial</strong><br />
<strong>statement</strong><br />
Statutory auditor’s report 22<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> 24<br />
Notes to the consolidated <strong>financial</strong> <strong>statement</strong> 29<br />
21
22<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Statutory auditor’s report<br />
STATUTORY AUDITOR’S REPORT TO<br />
THE GENERAL MEETING OF SHAREHOLDERS<br />
OF AQUAFIN NV ON THE CONSOLIDATED<br />
FINANCIAL STATEMENTS FOR THE YEAR<br />
ENDED 31 DECEMBER <strong>2011</strong><br />
In accordance with the legal requirements, we report to<br />
you on the performance of our mandate of statutory auditor.<br />
This report contains our opinion on the consolidated <strong>financial</strong><br />
<strong>statement</strong>s as well as the required additional comments.<br />
UNQUALIFIED OPINION ON THE CONSOLIDATED<br />
FINANCIAL STATEMENTS<br />
We have audited the consolidated <strong>financial</strong> <strong>statement</strong>s<br />
of <strong>Aquafin</strong> NV and its subsidiaries (collectively referred to as<br />
‘the Group’) for the year ended 31 December <strong>2011</strong>, prepared in<br />
accordance with International Financial Reporting Standards<br />
(IFRS) as adopted by the European Union, and with the legal and<br />
regulatory requirements applicable in Belgium. These consolidated<br />
<strong>financial</strong> <strong>statement</strong>s comprise the consolidated balance sheet<br />
as at 31 December <strong>2011</strong>, and the consolidated <strong>statement</strong>s of<br />
income, changes in equity and cash flows for the year then<br />
ended, as well as the summary of significant accounting<br />
policies and other explanatory notes. The consolidated<br />
balance sheet shows total assets of € 2.296.068 (‘000) and the<br />
consolidated <strong>statement</strong> of income shows a profit for the year,<br />
share of the Group, of € 8.028 (‘000).<br />
n<br />
Responsibility of the board of directors for the preparation<br />
and fair presentation of the consolidated <strong>financial</strong><br />
<strong>statement</strong>s<br />
n<br />
Responsibility of the statutory auditor<br />
Our responsibility is to express an opinion on these<br />
consolidated <strong>financial</strong> <strong>statement</strong>s based on our audit.<br />
We conducted our audit in accordance with the legal<br />
requirements and the auditing standards applicable in<br />
Belgium, as issued by the Institute of Registered Auditors<br />
(Instituut van de Bedrijfsrevisoren). Those standards require<br />
that we plan and perform the audit to obtain reasonable<br />
assurance whether the <strong>financial</strong> <strong>statement</strong>s are free from<br />
material mis<strong>statement</strong>.<br />
In accordance with these standards, we have performed<br />
procedures to obtain audit evidence about the amounts<br />
and disclosures in the consolidated <strong>financial</strong> <strong>statement</strong>s.<br />
The procedures selected depend on our judgment, including<br />
the assessment of the risks of material mis<strong>statement</strong> of<br />
the consolidated <strong>financial</strong> <strong>statement</strong>s, whether due to fraud<br />
or error. In making those risk assessments, we have considered<br />
internal control relevant to the Group’s preparation and fair<br />
presentation of the consolidated <strong>financial</strong> <strong>statement</strong>s in order<br />
to design audit procedures that are appropriate in the<br />
circumstances, but not for the purpose of expressing an<br />
opinion on the effectiveness of the Group's internal control.<br />
We have evaluated the appropriateness of accounting policies<br />
used, the reasonableness of significant accounting estimates<br />
made by the Group and the presentation of the consolidated<br />
<strong>financial</strong> <strong>statement</strong>s, taken as a whole. Finally, we have<br />
obtained from the board of directors and the Group’s officials<br />
the explanations and information necessary for executing<br />
our audit procedures. We believe that the audit evidence we<br />
have obtained is sufficient and appropriate to provide a basis<br />
for our opinion.<br />
The board of directors is responsible for the preparation<br />
and fair presentation of the consolidated <strong>financial</strong> <strong>statement</strong>s.<br />
This responsibility includes: designing, implementing and<br />
maintaining internal control relevant to the preparation and<br />
fair presentation of consolidated <strong>financial</strong> <strong>statement</strong>s that<br />
are free from material mis<strong>statement</strong>, whether due to fraud or<br />
error; selecting and applying appropriate accounting policies;<br />
and making accounting estimates that are reasonable in<br />
the circumstances.
n<br />
Opinion<br />
In our opinion, the consolidated <strong>financial</strong> <strong>statement</strong>s for<br />
the year ended 31 December <strong>2011</strong> give a true and fair view<br />
of the Group’s <strong>financial</strong> position and of the results of its<br />
operations and its cash flows in accordance with IFRS as<br />
adopted by the European Union, and with the legal and<br />
regulatory requirements applicable in Belgium.<br />
ADDITIONAL COMMENTS AND INFORMATION<br />
The preparation and the assessment of the information<br />
that should be included in the directors’ report on the<br />
consolidated <strong>financial</strong> <strong>statement</strong>s are the responsibility of<br />
the board of directors.<br />
Our responsibility is to include in our report the following<br />
additional comments, which do not modify the scope of our<br />
opinion on the consolidated <strong>financial</strong> <strong>statement</strong>s:<br />
• The directors’ report on the consolidated <strong>financial</strong><br />
<strong>statement</strong>s deals with the information required by law and<br />
is consistent with the consolidated <strong>financial</strong> <strong>statement</strong>s.<br />
We are, however, unable to comment on the description<br />
of the principal risks and uncertainties which the entities<br />
included in the consolidation are facing, and on their<br />
<strong>financial</strong> situation, their foreseeable evolution or the<br />
significant influence of certain facts on their future<br />
development. We can nevertheless confirm that<br />
the matters disclosed do not present any obvious<br />
inconsistencies with the information that we became<br />
aware of during the performance of our mandate.<br />
Antwerp, 8 March 2012<br />
Ernst & Young Reviseurs d’Entreprises SCCRL<br />
Statutory auditor<br />
represented by<br />
Ronald Van den Ecker<br />
Partner<br />
Ref.: 12RVE0088<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
23
24<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
CONSOLIDATED BALANCE SHEET (at 31 December <strong>2011</strong>)<br />
At 1 January<br />
(in €000) Background <strong>2011</strong> 2010 2010<br />
ASSETS<br />
FIXED ASSETS<br />
Long-term receivables Management Agreement 5 2,056,559 1,727,763 1,464,186<br />
Other <strong>financial</strong> assets 5.1 27,440 10,373 9,884<br />
Total 2,083,999 1,738,136 1,474,069<br />
CURRENT ASSETS<br />
Short-term receivables Management Agreement 5 111,643 107,436 88,684<br />
Trade receivables and other receivables 5.2 27,188 20,477 25,226<br />
Other <strong>financial</strong> liquid assets 5.3 1,476 913 452<br />
Funds and cash equivalents 5.4 71,763 4,259 38,340<br />
Total 212,069 133,085 152,701<br />
TOTAL ASSETS 2,296,068 1,871,220 1,626,770<br />
EQUITY AND LIABILITIES<br />
NET EQUITY<br />
Share capital 5.5 210,900 198,400 149,429<br />
Group reserves 5.6 & 5.7 27,741 26,437 28,188<br />
Total equity 238,641 224,837 177,617<br />
LONG-TERM LIABILITIES<br />
Interest-bearing loans 5.8 1,568,254 1,217,408 1,173,362<br />
Other long-term <strong>financial</strong> liabilities 5.9 135,401 44,691 20,096<br />
Provisions 5.1 7,064 2,139 2,173<br />
Pension liabilities 5.11 6,827 6,907 6,589<br />
Total 1,717,546 1,271,145 1,202,219<br />
CURRENT LIABILITIES<br />
Commercial debts and other payables 5.12 83,115 79,447 69,559<br />
Interest-bearing loans 5.8 239,910 281,033 163,487<br />
Other short-term <strong>financial</strong> liabilities 5.13 15,086 13,056 13,768<br />
Taxes payable 5.14 1,770 1,701 121<br />
Total 339,881 375,238 246,935<br />
Total liabilities 2,057,427 1,646,383 1,449,153<br />
TOTAL EQUITY AND LIABILITIES 2,296,068 1,871,220 1,626,770
CONSOLIDATED PROFIT AND LOSS ACCOUNT (for <strong>financial</strong> year <strong>2011</strong>)<br />
(in €000) Background <strong>2011</strong> 2010<br />
CONTINUING OPERATIONS<br />
Services rendered 6 297,445 247,956<br />
Revenues 297,445 247,956<br />
Other company income 6.1 15,804 6,803<br />
Raw materials and additives, services and miscellaneous goods 6.2 -163,426 -125,755<br />
Personnel costs 6.3 -59,187 -55,982<br />
Write-offs, amortisations and special devaluations 6.4 -344 -212<br />
Other charges 6.5 -4,074 -3,394<br />
Costs of financing 6.6 -79,323 -62,302<br />
Financing income 6.7 2,237 846<br />
Profit before taxes from ongoing business activities 9,132 7,960<br />
Tax burden 6.8 -1,980 -910<br />
Charge-through of tax burden via Management Agreement receivables 6.8 876 397<br />
Profit from ongoing business activities 8,028 7,447<br />
NET PROFIT 8,028 7,447<br />
To be allocated to:<br />
Owners of equity instruments of the parent company 8,028 7,447<br />
Result per share (€)<br />
ordinary profit per share, to be allocated to holders of<br />
ordinary shares of the parent company 6.9 9.91 9.31<br />
diluted profit per share, to be allocated to holders of<br />
ordinary shares of the parent company 6.9 9.91 9.31<br />
Profit per share from ongoing business activities (€)<br />
ordinary profit per share from ongoing business activities,<br />
to be allocated to holders of ordinary shares of the parent company 6.9 9.91 9.31<br />
diluted profit per share from ongoing business activities,<br />
to be allocated to holders of ordinary shares of the parent company 6.9 9.91 9.31<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
25
26<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
CONSOLIDATED OVERVIEW OF REALISED AND UNREALISED RESULTS<br />
(for <strong>financial</strong> year <strong>2011</strong>)<br />
(in €000) Background <strong>2011</strong> 2010<br />
NET PROFIT 8,028 7,447<br />
UNREALISED RESULTS<br />
Net increase in value of cash flow hedges 5.9 -79,711 -20,303<br />
Charge-through of tax burden via Management Agreement receivables 5.9 79,711 20,303<br />
Actuarial profits and losses on defined contribution plans 5.11 564 172<br />
Charge-through of tax burden via Management Agreement receivables 5.11 -564 -172<br />
Unrealised results after taxes 0 0<br />
TOTAL REALISED AND UNREALISED RESULTS AFTER TAXES 8,028 7,447<br />
To be allocated to:<br />
Owners of equity instruments of the parent company 8,028 7,447
CONSOLIDATED CHANGE OVERVIEW OF EQUITY<br />
(at 31 December <strong>2011</strong>)<br />
EQUITY ATTRIBUTABLE TO HOLDERS<br />
OF THE EQUITY INSTRUMENTS<br />
OF THE PARENT COMPANY<br />
(in €000) Share capital Group reserves Total equity<br />
AT 1 JANUARY <strong>2011</strong> 198,400 26,437 224,837<br />
Profit over the <strong>financial</strong> year 8,028 8,028<br />
Unrealised results 0 0<br />
REALISED AND UNREALISED RESULTS 0 8,028 8,028<br />
Paid-up capital 12,500.0 0.0 12,500<br />
Dividends -6,724 -6,724<br />
AT 31.12.11 210,900 27,741 238,641<br />
CONSOLIDATED CHANGE OVERVIEW OF EQUITY<br />
(at 31 December <strong>2011</strong>)<br />
EQUITY ATTRIBUTABLE TO HOLDERS<br />
OF THE EQUITY INSTRUMENTS<br />
OF THE PARENT COMPANY<br />
(in €000) Share capital Group reserves Total equity<br />
AT 1 JANUARY 2010 149,429 28,188 177,617<br />
Profit over the <strong>financial</strong> year 7,447 7,447<br />
Unrealised results 0 0<br />
REALISED AND UNREALISED RESULTS 0 7,447 7,447<br />
Paid-up capital 48,971 0 48,971<br />
Dividends -9,198 -9,198<br />
AT 31.12.10 198,400 26,437 224,837<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
27
28<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
CONSOLIDATED CASH-FLOW OVERVIEW (for <strong>financial</strong> year <strong>2011</strong>)<br />
(in €000) Background <strong>2011</strong> 2010<br />
OPERATIONAL ACTIVITIES<br />
Payments to suppliers -157,537 -119,758<br />
Payments to personnel -59,189 -55,982<br />
Client receipts 7.1 407,661 364,992<br />
Corporate taxes paid -1,713 -102<br />
Net operational cash flow 189,223 189,150<br />
INVESTMENT ACTIVITIES<br />
Acquisitions under the Management Agreement receivables -367,673 -366,476<br />
Net investment cash flow -367,673 -366,476<br />
FINANCING ACTIVITIES<br />
Financing receipts 442,400 295,413<br />
Financing repayments -141,357 -133,529<br />
Interest paid -56,419 -56,357<br />
Receipts from capital increase 12,500 48,971<br />
Dividends paid out -6,724 -9,198<br />
Other investment transactions (net) -4,446 -2,056<br />
Net financing cash flow 245,954 143,245<br />
Net increase in funds and cash equivalents 67,504 -34,081<br />
FUNDS AND CASH EQUIVALENTS ON 1 JANUARY 4,259 38,340<br />
FUNDS AND CASH EQUIVALENTS ON 31 DECEMBER 71,763 4,259
Notes to the consolidated <strong>financial</strong><br />
<strong>statement</strong><br />
General information<br />
INFORMATION ABOUT THE COMPANY<br />
<strong>Aquafin</strong> is a limited liability public company that was<br />
founded on 25 April 1990. The company is located at<br />
2630 Aartselaar, Belgium. On 29 September 2009, <strong>Aquafin</strong><br />
issued a bond loan that is listed on Euronext Brussels<br />
(www.aquafin.be/UserFiles/File/pdf/KT_-_Fortis_<strong>Aquafin</strong>_-<br />
_Prospectus__final.pdf).<br />
For a description of the company's primary activities,<br />
please see the annual report.<br />
The consolidated <strong>financial</strong> <strong>statement</strong> for <strong>financial</strong> year <strong>2011</strong><br />
was authorized for issue by the Board of Directors of the<br />
company on 8 March 2012.<br />
<strong>Aquafin</strong> NV is a 100% subsidiary of the Vlaamse Milieu -<br />
holding (Flemish Environmental Holding Company).<br />
Critical accounting judgments and key sources<br />
of estimation uncertainty<br />
BASIS FOR THE PREPARATION, VALUATION<br />
RULES AND CONSOLIDATION<br />
n<br />
Basis of presentation<br />
The consolidated <strong>financial</strong> <strong>statement</strong>s are presented under<br />
the historical cost convention, except for derivatives that were<br />
valued at their fair value. The consolidated <strong>financial</strong> <strong>statement</strong><br />
is presented in (thousands of) euros.<br />
n<br />
Conformity declaration<br />
The consolidated <strong>financial</strong> <strong>statement</strong> of the group was<br />
prepared in accordance with the International Financial<br />
Reporting Standards (IFRS), as published by the IASB and<br />
accepted in the European Union.<br />
n<br />
Principles of consolidation<br />
The consolidated <strong>financial</strong> <strong>statement</strong> of <strong>financial</strong> year <strong>2011</strong>,<br />
ending on 31-12-<strong>2011</strong>, comprises the company and its<br />
subsidiaries (hereinafter: 'the group') and the interests of<br />
the group in related participations.<br />
All of the entities of the group use the same principles for<br />
<strong>financial</strong> reporting.<br />
a. Subsidiaries<br />
Subsidiaries are entities over which the group has<br />
decisive influence, which means that the group is able,<br />
directly or indirectly, to govern the <strong>financial</strong> and<br />
operational policies of an entity so as to obtain benefits<br />
from its activities. The <strong>financial</strong> <strong>statement</strong> of a<br />
subsidiary is included in the consolidated <strong>financial</strong><br />
<strong>statement</strong> from the date of acquisition until the date<br />
when control is relinquished.<br />
b. Transactions eliminated by the consolidation<br />
All of the intercompany balances, profits and losses, and<br />
unrealised profits, losses and dividends arising from<br />
transactions within the group are eliminated completely<br />
when preparing the consolidated <strong>financial</strong> <strong>statement</strong>.<br />
IMPORTANT ACCOUNTANT EVALUATIONS,<br />
ASSESSMENTS AND ASSUMPTIONS<br />
n<br />
Evaluations<br />
It is the opinion of management that provisions for<br />
personnel remuneration, extraordinary devaluations, etc.,<br />
are assessed on the basis of market-value parameters.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
29
30<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
The early retirement scheme is also processed as a defined<br />
benefit plan inasmuch as the group has an actual liability with<br />
respect to the employees concerned. The group acknowledges<br />
a provision on the balance that is calculated in accordance<br />
with the ‘projected unit credit method’.<br />
n<br />
Estimates and assumptions<br />
To execute its (supramunicipal) contracts, <strong>Aquafin</strong> NV<br />
entered into a management agreement with the Flemish<br />
Region. The management agreement sets out the tasks of<br />
<strong>Aquafin</strong> NV and the payments that the company will receive<br />
for those tasks.<br />
The elements from that management agreement, which<br />
have been set out below, are crucial to the further assessment<br />
of the accounts.<br />
• All of the reasonable costs that <strong>Aquafin</strong> NV makes in the<br />
context of the supramunicipal sanitation of household<br />
wastewater are paid by the Flemish Region through<br />
the drinking water companies.<br />
• The management agreement has a rolling nature, which<br />
means that it is automatically extended every year<br />
unless one of the parties has terminated the agreement.<br />
The notice period for termination is 20 years.<br />
• During the execution of the management agreement,<br />
<strong>Aquafin</strong> NV has the right of use and enjoyment of the<br />
infrastructure created, purchased or leased by the<br />
company. At the end of the management agreement<br />
– after the settlement of all remaining payments due –<br />
the ownership of that infrastructure will be transferred<br />
to the Flemish Region at no charge.<br />
• During the execution of the management agreement,<br />
the construction and operations risks are borne by<br />
<strong>Aquafin</strong> NV.<br />
The interpretation IFRIC 12 - Service Concession Agreements<br />
applies to public-private agreements if the following<br />
conditions are satisfied:<br />
• the party that grants the concession ('grantor') controls<br />
or regulates the services that the operator is required<br />
to provide with the infrastructure, whom those services<br />
are to be delivered to, and the price;<br />
• the grantor controls the ultimate right through<br />
ownership. In other words, the grantor has control over<br />
the significant residual value in the infrastructure at<br />
the end of the life of the agreement.<br />
The most important characteristic of the aforementioned<br />
interpretation is the nature of the services. The activities of<br />
the operator must be of ´public utility´ (the so-called 'public<br />
service obligation'). The services related to the infrastructure<br />
are provided by <strong>Aquafin</strong> to the public (in the broad sense of<br />
the term) within a pre-determined policy, i.e. the management<br />
agreement. This determines which 'public' services are to be<br />
provided, to wit, the expansion and management of the<br />
supramunicipal infrastructure for treating household<br />
wastewater.<br />
Infrastructure assets within the scope of the agreement<br />
are assets built or acquired for use within the context of<br />
the concession agreement or existing infrastructure to which<br />
the operator has been granted access.<br />
All of the infrastructure built, purchased or leased by<br />
<strong>Aquafin</strong> NV in the context of the management agreement<br />
with the Flemish Region falls within the scope of this<br />
interpretation. As a result, the infrastructure concerned is not<br />
treated as tangible fixed assets in the <strong>financial</strong> <strong>statement</strong><br />
of the company.<br />
PRINCIPLES FOR THE ITEMS OF THE BALANCE<br />
STATEMENT<br />
n<br />
n<br />
Intangible assets<br />
Research and development<br />
Expenditures on research activities are recognized in the<br />
results for the period in which they were incurred.<br />
Lease agreements<br />
a. The group as lessee<br />
The group has entered into several operational lease<br />
agreements. They therefore do not include a transfer of<br />
the actual risks and rewards of ownership. In the event<br />
of operational leases, the lease payments are shown as<br />
costs and are distributed linearly over the lease period.<br />
b. The group as lessor<br />
Lease agreements in which the group acts as lessor are<br />
classified as <strong>financial</strong> leases if the group transfers<br />
substantially all of the risks and rewards of ownership<br />
of an asset to the lessee. The group will include a claim<br />
in the balance <strong>statement</strong> that is equal to the net<br />
investment in the lease.
n<br />
Financial assets<br />
n<br />
Debts<br />
a. Receivables in the context of the concession agreement<br />
In the context of the application of IFRIC 12, the group<br />
applies the "<strong>financial</strong> asset model". That applies when<br />
the operator has an unconditional right to actively<br />
receive cash or other <strong>financial</strong> asset from the grantor.<br />
In exchange for the services performed under the<br />
concession agreement, the group has an unconditional<br />
right as an operator and is contractually – within the<br />
context of the management agreement – remunerated<br />
by the grantor (the Flemish Region).<br />
The group will consider this <strong>financial</strong> asset as a<br />
receivable in the category of "Loans and receivables".<br />
It is valued at the amortized cost price, which is<br />
calculated based on the so-called effective interest<br />
method. The consequences of the specific context in<br />
which the group carries out its activities and the fact<br />
that the group is not allowed to charge interest<br />
compensation are that the calculation of the effective<br />
interest rate has no impact.<br />
b. Trade receivables and other receivables<br />
These <strong>financial</strong> assets are valued at the amortized cost<br />
price in accordance with IAS39 §46 (a) – at fair value<br />
increased by any transaction costs when first booked.<br />
The valuation of the fixed income securities follows the<br />
same rules.<br />
The uncollectable receivables are written off against<br />
the relevant provision account at each balance sheet<br />
date. The additions to and recoveries from this account<br />
are both reported in the profit and loss account.<br />
c. Funds and cash equivalents<br />
Funds consist of cash and demand deposits.<br />
Cash equivalents are short-term, extremely liquid<br />
investments that can be converted immediately into<br />
a known amount of cash and that do not have an<br />
inherent material risk of change of value.<br />
d. Financial assets available for sale<br />
Financial assets available for sale are the non-derived<br />
<strong>financial</strong> assets that are designated as being available for<br />
sale or that are not classified as (a) loans and receivables,<br />
(b) investments retained until the end of the maturity<br />
period, or (c) <strong>financial</strong> assets valued at fair value with the<br />
changes in value being shown in the profit and loss<br />
account. They are valued at the fair value in the balance<br />
<strong>statement</strong>, with the changes in value being incorporated<br />
in the unrealised results.<br />
n<br />
a. Financial debts<br />
When first included in the balance <strong>statement</strong>, <strong>financial</strong><br />
liabilities are valued at fair value, increased by the<br />
transaction costs that are directly attributable to the<br />
issue of the <strong>financial</strong> liability. After the first inclusion,<br />
those <strong>financial</strong> liabilities are valued at the amortized<br />
cost price, with the effective interest methodology<br />
being used.<br />
b. Commercial debt and other short-term debts<br />
Commercial debt and other short-term debt are valued<br />
at the amortized cost price.<br />
Provisions<br />
Provisions are shown in the balance <strong>statement</strong> if:<br />
• the group has a present liability (legal or constructive)<br />
as a result of a past event;<br />
• it is probable that an outflow of resources embodying<br />
economic benefits will be required to settle the liability;<br />
• a reliable estimate can be made of the amount of<br />
the liability.<br />
In other words, provisions are shown if they are probable<br />
and if there is a current liability on the date that the balance<br />
is prepared.<br />
Provisional assets are not shown in the balance <strong>statement</strong><br />
but are shown in the explanations if an inflow of economic<br />
rewards is probable. Provisional liabilities are not shown on<br />
the balance <strong>statement</strong> but are shown in the explanations<br />
unless the chance of a loss is negligible.<br />
The burden that is associated with a provision is shown<br />
in the profit and loss account. The group shows the certain<br />
payments (from the Flemish Region or the insurance<br />
company) as an asset.<br />
If the impact due to discounting of the future cash<br />
outflows required is material, the provisions are updated<br />
annually based on the generally used discounting rate<br />
that expresses the time value of money that applies on the<br />
balance date.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
31
32<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
n<br />
Employee benefit provisions<br />
There are two types of pension schemes within the group:<br />
the defined contribution plan and the defined benefit plan.<br />
Liabilities with respect to defined contribution plan are<br />
immediately applied against the profit and loss account.<br />
The periodic premium payment is registered as a period cost.<br />
The debt or possible receivable from the defined benefit<br />
plan is shown in the balance <strong>statement</strong>. In such schemes,<br />
the amount in the balance <strong>statement</strong> (the net liability)<br />
matches the cash value of the gross liability, reduced by the<br />
fair value of the fund investments and adjusted for not-taken<br />
pension costs for past employment.<br />
To be able to estimate future liabilities accurately, a specific<br />
actuarial calculation, the projected unit credit method will be<br />
used. For dealing with actuarial profits and losses, a choice<br />
has been made to deduct equity immediately by means of an<br />
equity change overview.<br />
Early retirement schemes are also treated as defined<br />
benefit plans. The group shows a provision that is calculated<br />
in accordance with the project unit credit method.<br />
n<br />
Taxes<br />
a. Tax on profits<br />
Current tax receivables and liabilities for the current and<br />
previous periods are valued at the amount that<br />
is expected to be received from or paid to the tax<br />
authorities in Belgium or elsewhere.<br />
In accordance with Article 43 of the management<br />
agreement with the Flemish Region, all of the reasonable<br />
costs incurred by the group in the context of this<br />
agreement will be compensated by the drinking water<br />
companies/the Flemish Region, including all levies<br />
and taxes owed by the group due to the execution of<br />
that agreement.<br />
b. VAT<br />
Revenues, costs and assets are shown after deducting<br />
the value-added tax, except: :<br />
• when the value-added tax on the purchase of assets or<br />
services cannot be recovered from the tax authorities,<br />
in which case the value-added tax will be shown as<br />
part of the cost of the acquisition of the asset or as<br />
part of the cost item;<br />
• for receivables and debts that are accounted for<br />
including the value-added tax.<br />
The net amount of the value-added tax that can be<br />
recovered or that is payable to the tax authorities is<br />
shown as part of the receivables and debts in the<br />
balance <strong>statement</strong>.<br />
c. Deferred taxes<br />
In view of the specific provisions of the management<br />
agreement, the group does not have any temporary<br />
differences in assets or liabilities that could give cause to<br />
establish a deferred tax debt or receivable.<br />
PRINCIPLES FOR ELEMENTS OF THE PROFIT<br />
AND LOSS ACCOUNT<br />
n<br />
Revenues<br />
In accordance with the management agreement, all<br />
reasonable costs of the company are compensated by the<br />
Flemish Region through the drinking water companies.<br />
Revenues are shown if it is probable that the economic<br />
rewards associated with the transaction will flow to the<br />
company and if the amount of the revenues can be measured<br />
in a reliable way. Turnover is shown after deducting the valueadded<br />
taxes and discounts. Revenues from the sale of goods<br />
or the delivery of services are shown when the delivery and<br />
the full transfer of risks and rewards have taken place.<br />
Dividends are shown at the moment that the right of<br />
the shareholder to receive the dividend has been set.
n<br />
a. Projects in progress on behalf of third parties<br />
For projects in progress on behalf of third parties that do<br />
not fall under the concession agreement, the revenues<br />
are shown in the profit and loss account based on<br />
the stage of completion of the project activities (the<br />
percentage of completion method). That method can<br />
only be used if the result of a project in progress on<br />
behalf of third parties can be estimated reliably.<br />
On the balance date, the group prepares an estimate<br />
of the results of the project: the difference between the<br />
expected contract revenues and the contract costs, as<br />
well as the stage of completion of the project activities.<br />
On the reporting date, that completion level is applied<br />
to the total of the expected revenues and costs in order<br />
to determine the amount of costs and revenues that<br />
are to be applied to the profit and loss account for<br />
the period.<br />
If the group expects a loss on the project in progress on<br />
behalf of third parties, that is posted against the results<br />
immediately.<br />
If the result of a project in progress on behalf of third<br />
parties cannot be estimated in a reliable way, only the<br />
revenues are shown to the value of the costs that will<br />
probably be recoverable.<br />
Costs of financing<br />
Financing costs are shown as an immediate charge in<br />
the period in which they are incurred. The group has no assets<br />
for which financing costs must be activated.<br />
n<br />
Hedging<br />
The group uses derivatives to hedge interest risks arising<br />
from the financing activities. Active interest management is<br />
done in accordance with the objectives and regulations<br />
imposed by the managing body. It is group policy not to enter<br />
into speculative transactions or leverage transactions.<br />
Hedge categories<br />
A distinction is made between two hedge categories: fair<br />
value hedges and cash flow hedges.<br />
Fair value hedges are hedges of the risk of change to<br />
the fair value of assets and liabilities. Both the derivatives<br />
that were designated as real-value hedges and their<br />
covered assets or liabilities are valued at fair value in the<br />
balance <strong>statement</strong> and changes in fair value are shown in<br />
the profit and loss account. If a hedge appears to no longer<br />
be very effective, the hedge accounting will be stopped and<br />
the adjustment to the book value of the covered interestbearing<br />
<strong>financial</strong> instrument will be written off linearly<br />
in the profit and loss account up to the expiry date of<br />
the covered position.<br />
Cash flow hedges are hedges of the possible variability of<br />
future cash flows that are related to the assets or liabilities<br />
shown, very probable expected future transactions or<br />
not-taken fixed commitments. Changes to the fair value of<br />
a hedging instrument that serves as a very effective<br />
cash flow hedge are shown in the overview of the<br />
unrealised results, more specifically in the hedge reserve.<br />
The ineffective part is shown in the profit and loss account<br />
immediately.<br />
Fair value hedge<br />
Cash flow hedge<br />
Qualified • Variation in time value = • Variation in time value =<br />
impact on results account<br />
impact on results account<br />
• Variation in intrinsic value = • Variation in intrinsic value =<br />
to be compensated mutually<br />
component of unrealised results<br />
• Coupon: calculated pro rata over the year<br />
• Coupon: calculated pro rata over the year<br />
Unqualified • Variation in total value = • Variation in total value =<br />
impact on results account<br />
impact on results account<br />
• Coupon: cash flow in that year<br />
• Coupon: cash flow in that year<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
33
34<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
n<br />
If the covered cash flow results in the uptake of a non<strong>financial</strong><br />
asset or liability, the cumulative fair value<br />
adjustment of the derivative will no longer be shown in the<br />
overview of the unrealised results, but will be included in<br />
the initial valuation of the cost price or the book value of<br />
the asset or liability. In all other cases, the cumulative fair<br />
value adjustment of the derivative will be transferred<br />
from the overview of the unrealised results to the profit<br />
and loss account at the moment that the covered fixed<br />
commitment or the planned action results in the posting of<br />
a profit or a loss. If a hedge no longer appears to be very<br />
effective, the hedge accounting will be stopped, but not<br />
retroactively. In that case, the cumulative fair value<br />
adjustment of the hedge instrument will be retained in<br />
the overview of unrealised results until the committed<br />
or expected transaction occurs. If a committed or<br />
scheduled transaction is no longer expected to take place,<br />
the cumulative fair value adjustments will be transferred<br />
from the overview of the unrealised results to the profit<br />
and loss account.<br />
Booking the movements<br />
The distinction between qualified and unqualified <strong>financial</strong><br />
instruments determines the methodology to be used.<br />
Events after the balance date<br />
Events after the balance that provide additional information<br />
concerning the company's situation on the balance date<br />
(so-called 'adjusting events') are shown in the <strong>financial</strong><br />
<strong>statement</strong>. Other events after balance date (so-called 'nonadjusting<br />
events’) are only shown in the explanations if they<br />
are considered to be important.<br />
n<br />
Segmented information<br />
For management purposes, the group is organised in two<br />
operational segments. One segment comprises the company<br />
activities under the concession agreement (management<br />
agreement) with the Flemish Region and the other comprises<br />
the commercial activities carried out primarily for (Flemish)<br />
cities and municipalities. In the second segment, the group is<br />
in direct competition with other sewerage managers.<br />
NEW AND AMENDED STANDARDS AND<br />
INTERPRETATIONS IN EFFECT FOR FINANCIAL<br />
YEARS COMMENCING ON 1 JANUARY <strong>2011</strong><br />
n<br />
Amendments to principles or explanations<br />
The principles of <strong>financial</strong> reporting applies are consistent<br />
with those for the previous fiscal year, with the following<br />
exceptions.<br />
As of 1 January <strong>2011</strong>, the group has implemented the<br />
following new and amended IFRS standards and IFRIC<br />
interpretations:<br />
• IAS 24 Related Party Disclosures, in effect from 1 January<br />
<strong>2011</strong><br />
• IAS 32 Financial Instruments: Presentation - Classification<br />
of Claim Emissions, in effect from 1 February 2010<br />
• IFRIC 14 - Prepayments of Minimum Funding Requirements,<br />
in effect from 1 January <strong>2011</strong><br />
• IFRIC 19 Extinguishing Financial Liabilities with Equity<br />
Instruments, in effect from 1 July 2010<br />
• Improvements to IFRSs (May 2010), in effect from 1 January<br />
<strong>2011</strong><br />
If the application of the standard or interpretation has<br />
consequences for the <strong>financial</strong> position or results of the group,<br />
a description is provided below.<br />
IAS 24 Related Party Disclosures<br />
The amendment clarifies the definition of a related party.<br />
The new definition emphasises a symmetrical view of<br />
relationships with related parties and clarifies the<br />
circumstances in which persons and managers in key<br />
positions influence the related parties. In the second place,<br />
the change introduces an exemption from the general<br />
information provision about related parties for transactions<br />
with governments and entities that are (collectively)<br />
controlled by governments or which governments have a<br />
substantial influence over. [This change had no impact on<br />
the current related party disclosures.]<br />
IAS 32 Financial Instruments: Presentation - Classification<br />
of Claim Emissions<br />
The amendment changes the definition of a <strong>financial</strong> liability<br />
to allow entities to consider claim emissions and specific<br />
options or warrants as equity instruments.
The amendment applies if rights have been granted pro<br />
rate to the current owners of the same category of<br />
non-derivative equity instruments to acquire a fixed<br />
number of equity instruments from the entity in exchange<br />
for a fixed amount in any currency. [This amendment<br />
had no consequences for the <strong>financial</strong> position or results of<br />
the group.]<br />
IFRIC 14 – Prepayments of Minimum Funding Requirements<br />
The amendment corrects the unintended consequence<br />
that arises when an entity is subject to a minimum funding<br />
requirement and makes prepayments to meet that<br />
obligation. The amendment makes it possible for an entity<br />
to consider a prepayment of future services costs to be a<br />
fund investment. [The group is not subject to a minimum<br />
funding requirement. This amendment therefore had<br />
no consequences for the <strong>financial</strong> position or results of<br />
the group.]<br />
IFRIC 19 Extinguishing Financial Liabilities with Equity<br />
Instruments<br />
The interpretation clarifies that equity instruments<br />
provided by a creditor to extinguish a <strong>financial</strong> liability<br />
should be considered as paid compensation. The equity<br />
instruments provided are valued at their fair value. If the<br />
fair value cannot be determined in a reliable way, the equity<br />
instruments must be valued so that they reflect the fair<br />
value of the <strong>financial</strong> liability that has been extinguished.<br />
The difference between the book value of the extinguished<br />
<strong>financial</strong> liability and the compensation paid is shown in<br />
the profit and loss account. [The first application of this<br />
interpretation had no consequences for the <strong>financial</strong><br />
position or results of the group.]<br />
Improvements to the IFRSs (published May 2010)<br />
In May 2010, the IASB published a third bundle with<br />
amendments to the standards, primarily to eliminate<br />
inconsistencies and for clarification. Different transition<br />
provisions apply to each standard. Processing the following<br />
amendments led to changes in the principles, but had<br />
no consequences for the <strong>financial</strong> position or results of<br />
the group.<br />
• IFRS 3 Business Combinations: clarifies that conditional<br />
compensations that arise from a business combination<br />
that took place before the first application of IFRS 3<br />
(revised version from 2008) must be dealt with in<br />
accordance with IFRS 3 (2005).<br />
• IFRS 3 Business Combinations: deals with payments<br />
based on shares that were not replaced and shares<br />
that were replaced voluntarily and dealing with them in<br />
the books in the context of a business combination.<br />
• IFRS 7 Financial Instruments: Disclosures: the amendment<br />
was intended to simplify the information provided by<br />
reducing the scope of the information concerning<br />
certainties and to improve the information by providing<br />
qualitative information, in addition to quantitative<br />
information. [The Group has illustrated this amendment<br />
in explanation 5.9.]<br />
• IAS 1 Presentation of Financial Statements: the amendment<br />
clarifies that the entity has the choice of providing the<br />
analysis of each component of the unrealised results in<br />
the overview of changes to equity or in the explanations.<br />
[The group provides that analysis in explanation 5.7]<br />
• IAS 27 <strong>Consolidated</strong> and separate <strong>financial</strong> <strong>statement</strong>s:<br />
clarifies the transition obligations with respect to<br />
the amendments to other standards as a result of the<br />
revision of the IAS 27 standard.<br />
• IFRIC 13 Customer Loyalty Programmes: clarifies that an<br />
entity must take into account discounts and other<br />
rewards that could be granted to customers that are not<br />
participating in a loyalty programme when determining<br />
the fair value of the rewards granted.<br />
The amendments shown below as a result of<br />
improvements to the IFRSs for the following standards<br />
had no consequences for the principles, <strong>financial</strong> position<br />
or performance of the group.<br />
• IFRS 3 Business Combinations<br />
• IAS 27 <strong>Consolidated</strong> and separate <strong>financial</strong> <strong>statement</strong>s<br />
• AIS 34 Interim Financial Reporting<br />
• IFRIC 13 Customer Loyalty Programmes<br />
• IFRS 3 Business Combinations: the options to valuations<br />
of minority interests were amended. Only the minority<br />
interests that give their owner right to a proportional<br />
share of the net assets of the entity in the event of<br />
cessation will be valued at fair value or at their<br />
proportional share of the net assets of the entity.<br />
All other minority interests are valued at their fair value<br />
on the takeover date.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
35
36<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
NEW AND AMENDED STANDARDS AND<br />
INTERPRETATIONS IN EFFECT FOR FINANCIAL<br />
YEARS COMMENCING ON 1 JANUARY <strong>2011</strong><br />
OR LATER<br />
n<br />
Standards that have been published but that have not yet<br />
taken effect<br />
The standards shown below were published on the date<br />
of publication of the Group´s <strong>financial</strong> <strong>statement</strong>s, but have<br />
not yet taken effect:<br />
• IFRS 7 Financial Instruments: Disclosures - Amendments<br />
to the disclosures 1 , in effect from 1 July <strong>2011</strong><br />
• IFRS 9 Financial instruments 1 , in effect from 1 January 2013<br />
• IFRS 10 The <strong>Consolidated</strong> and Separate Financial<br />
Statement 1 , in effect from 1 January 2013<br />
• IFRS 11 Joint Arrangements 1 , in effect from 1 January 2013<br />
• IFRS 12 Disclosure of Interests in Other Entities 1 , in effect<br />
from 1 January 2013<br />
• IFRS 13 Fair Value Measurements 1 , in effect from 1 January<br />
2013<br />
• IAS 1 Presentation of Financial Statements 1 , in effect from<br />
1 July 2012<br />
• IAS 12 Income Taxes – Settlement of Tax Claims 1 , in effect<br />
from 1 January 2012<br />
• IAS 19 Employee Benefits 1 , in effect from 1 January 2013<br />
1 These amendments had not yet been approved by the EU as of<br />
30 September <strong>2011</strong>.<br />
IFRS 7 Financial Instruments: Disclosures<br />
The amendments to IFRS 7 are in effect for <strong>financial</strong> years<br />
commencing on or after 1 July <strong>2011</strong> and will lead to better<br />
understanding of transactions of <strong>financial</strong> assets, more<br />
specifically with respect to the possible influence of risks<br />
associated with the assets sold that continue to be on<br />
the entity's account. The amendments furthermore require<br />
making additional disclosures if a substantial number of<br />
transactions took place towards the end of the <strong>financial</strong><br />
year. [The group does not expect the amendments to have<br />
an impact on the current disclosures.]<br />
IFRS 9 Financial Instruments<br />
The current version of IFRS 9 sets the first phase for<br />
the project of the IASB to replace IAS 39. It applies to<br />
the classification and valuation of <strong>financial</strong> assets and<br />
liabilities. The standard applies to <strong>financial</strong> years<br />
commencing on or after 1 January 2013. In the following<br />
phases, the IAS will deal with devaluations and hedging.<br />
The IASB expects to complete the project in 2012. [The first<br />
application of the first phase of IFRS 9 will have an impact on<br />
the classification and valuation of the <strong>financial</strong> assets of the<br />
group. The group will evaluate the impact of these and the<br />
subsequent phases in its <strong>financial</strong> <strong>statement</strong> so that a<br />
complete picture can be provided.]<br />
IFRS 10 The <strong>Consolidated</strong> and Separate Financial Statement<br />
The standard applies to <strong>financial</strong> years commencing on or<br />
after January 2013. It states that the concept of control is<br />
decisive in determining whether an entity should be<br />
included in the consolidated <strong>financial</strong> <strong>statement</strong> of a<br />
parent company. The standard offers additional assistance<br />
in assessing control where necessary. [The company is<br />
currently assessing the impact of this standard.]<br />
IFRS 11 Joint Arrangements<br />
The standard applies to <strong>financial</strong> years commencing on or<br />
after 1 January 2013. With respect to the processing of joint<br />
arrangements, it concentrates primarily on the rights<br />
and obligations of the rules rather than the legal form.<br />
The standard obliges the entity to apply a single<br />
accounting treatment of interests in jointly controlled<br />
entities. [The company is currently assessing the impact of<br />
this standard.]<br />
IFRS 12 Disclosure of Interests in Other Entities<br />
The standard applies to <strong>financial</strong> years commencing on<br />
or after 1 January 2013. It deals with disclosures for all types<br />
of interests in other entities, including joint arrangements,<br />
associated participation, for entities established for a<br />
special purpose and other entities that were not included<br />
in the balance <strong>statement</strong>. [The company is currently<br />
assessing the impact of this standard.]<br />
IFRS 13 Fair Value Measurements<br />
The standard applies to <strong>financial</strong> years commencing on or<br />
after 1 January 2013. It provides a definition of fair value<br />
and a single source of fair value measurement and<br />
disclosure in the application thereof in IFRS. [The company<br />
is currently assessing the impact of this standard.]<br />
IAS 1 Presentation of Financial Statements<br />
The amendments apply to <strong>financial</strong> years commencing on<br />
or after 1 July 2012. The amendments dictate splitting up<br />
the elements in the unrealised results that can be moved to<br />
the profit and loss account. The amendments furthermore<br />
confirm the existing obligation to show the elements of the<br />
unrealised results in a single overview or in two consecutive<br />
overviews. [The company is currently assessing the impact of<br />
this standard.]
IAS 12 Income taxes<br />
The amended standard applies to <strong>financial</strong> years<br />
commencing on or after 1 January 2012. The amendment<br />
offers a practical solution to the difficult and subjective<br />
assessment of the disposal through use or sale when the<br />
asset is valued at fair value in accordance with the standard<br />
IAS 40 Investment Property by introducing an assumption<br />
that the asset will be disposed of through sale. [The group<br />
expects this change to have no impact on its <strong>financial</strong><br />
position or results.]<br />
IAS 19 Employee Benefits<br />
The amended standard applies to <strong>financial</strong> years<br />
commencing on or after 1 January 2013. The amendment<br />
eliminates the possibility of deferring the recording of<br />
profits and losses, known under the name 'corridor<br />
method'. The amendments streamline the presentation of<br />
changes in assets and liabilities arising from the defined<br />
benefit plan. That includes incorporating the revaluations<br />
in the unrealised results. Furthermore, they improve<br />
the disclosures for defined benefit plans by asking for<br />
additional information concerning the characteristics of<br />
defined benefit plans and concerning the risks that entities<br />
bear by participating in such plans. [The company is<br />
currently assessing the impact of this standard.]<br />
IFRS 1 – first application of IFRS<br />
GENERAL<br />
Since <strong>2011</strong> – the first IFRS reporting period – the<br />
consolidated <strong>financial</strong> <strong>statement</strong>s of the Group are prepared<br />
in accordance with the standards and interpretations as<br />
published by the International Accounting Standards Board<br />
(IASB) and accepted in the European Union.<br />
The IFRS opening balance at 1 January 2010 (the date of<br />
transition to IFRS) was prepared in accordance with IFRS 1 -<br />
First application of International Financial Reporting Standards.<br />
PRINCIPLES FOR THE PREPARATION OF<br />
THE CONSOLIDATED FINANCIAL STATEMENT<br />
IFRS 1 requires the retroactive application of every IFRS<br />
applicable to the reporting date of the first IFRS consolidated<br />
<strong>financial</strong> <strong>statement</strong>. Several exceptions to that principle are<br />
permitted. The Group made use of the following exceptions:<br />
• Application of IAS 37 Provisions: the information that<br />
was available at the moment of the preparation of<br />
the opening balance and that had been sufficient under<br />
BE GAAP was used further. The retroactive split of the net<br />
provisions in a gross liability and compensation to be<br />
received would have been too expensive, which would<br />
not have been proportional to the improved quality of<br />
the information.<br />
IFRS OPENING BALANCE AT 01.01.2010<br />
AND DISCUSSION OF THE DEVIATIONS BE<br />
GAAP - IFRS PER BNALACE POST<br />
All changes are the result of amendments to the principles<br />
for <strong>financial</strong> reporting and are therefore not the result of<br />
corrections of errors that would have been made due to<br />
the application of the previous GAAP (Belgian GAAP or BE<br />
GAAP) in the previous <strong>financial</strong> <strong>statement</strong>.<br />
The amounts reported under BE GAAP are <strong>Aquafin</strong>'s<br />
unconsolidated figures. Legally, both <strong>Aquafin</strong> NV and<br />
Aquaplus NV can invoke the exemption from subconsolidation<br />
included in Section 113 §1 and §2, first paragraph of the<br />
Companies Code. Under IFRS, the consolidated figures of<br />
the group are reported, including the 100% subsidiary<br />
Aquaplus NV.<br />
n<br />
Discussion of reworking of BE GAAP - IFRS per balance post<br />
1. Tangible fixed assets<br />
Assets established, purchased or leased as part of the<br />
management agreement<br />
The primary impact of the transition of the group to IFRS<br />
was on the administrative procedures for the establishment<br />
and operation of the tangible fixed assets. All of the<br />
infrastructure established, purchased or leased as part of<br />
the management agreement with the Flemish Region<br />
falls within the scope of interpretation IFRIC 12 - Service<br />
Concession Agreements (1). As a result, the infrastructure<br />
concerned is not treated as tangible fixed assets in the<br />
<strong>financial</strong> <strong>statement</strong> of the company.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
37
38<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
ASSETS<br />
BE GAAP IFRS conversion IFRS - consolidated<br />
(in €000) 31/12/2009 01/01/2010<br />
FIXED ASSETS 2,353,822 -879,752 1,474,069<br />
Tangible fixed assets 2,353,130 -2,353,130 (1)<br />
Long-term receivables Management Agreement 1,464,186 1,464,186 (2)<br />
Financial fixed assets 692 -692 (3)<br />
Other <strong>financial</strong> assets 9,884 9,884 (4)<br />
CURRENT ASSETS 75,532 77,169 152,701<br />
Stocks and orders in progress 24,024 -24,024 (5)<br />
Short-term receivables Management Agreement 88,684 88,684 (2)<br />
Receivables of no more than one year 13,418 11,808 25,226 (6)<br />
Cash and cash equivalents 37,639 701 38,340 (7)<br />
Deferred accounts active 452 0 452<br />
TOTAL ASSETS 2,429,354 -802,583 1,626,770<br />
EQUITY AND LIABILITIES<br />
NET EQUITY 975,485 -797,868 177,617<br />
Share capital 149,429 0 149,429<br />
Reserves 17,801 10,387 28,188 (8)<br />
Profit carried forward 6 -6 (8)<br />
Capital subsidies (Reimbursements Flemish Region/<br />
drinking water companies) 808,248 -808,248 (8)<br />
PROVISIONS FOR RISKS AND COSTS 2,478 6,283 8,761<br />
Pensions and similar liabilities 305 6,283 6,589 (9)<br />
Other risks and costs 2,173 0 2,173<br />
DEBTS 1,451,391 -10,999 1,440,392<br />
Interest-bearing loans with terms of more than 1 year 1,173,362 0 1,173,362<br />
Other long-term debts 104 19,992 20,096 (10)<br />
Interest-bearing loans with terms of less than 1 year 163,487 0 163,487<br />
Commercial debts and other short-term debts 100,912 -31,353 69,559 (11)<br />
Taxes payable 121 121 (11)<br />
Deferred liability account 13,528 240 13,768 (12)<br />
TOTAL EQUITY AND LIABILITIES 2,429,354 -802,583 1,626,770
Those provisions have particular application on the<br />
following investments, which were activated under BE<br />
GAAP:<br />
• all of the investments in (supramunicipal) sewer and<br />
treatment infrastructure, both completed investment<br />
projects and investment projects in progress;<br />
• hydronaut studies, completed and in progress;<br />
• office buildings, purchased or acquired via <strong>financial</strong><br />
lease;<br />
• computer and office equipment, furnishings, etc.;<br />
for a total amount of €2,346,306 k.<br />
Under BE GAAP, those investments were activated at the<br />
acquisition value minus accumulated write-offs. Under IFRS,<br />
no tangible fixed assets are recognised.<br />
(1) Interpretation IFRIC 12 - Service Concession Agreements<br />
as ratified on 25 May 2009 by the European Commission,<br />
applies to <strong>Aquafin</strong>. After all:<br />
The agreement is a 'public-to-private concession'.<br />
In view of the legal framework of the management<br />
agreement between <strong>Aquafin</strong> and the Flemish Region, one<br />
could say that <strong>Aquafin</strong> is an extension of the government<br />
from an economic perspective. That leads to the question<br />
of whether there really is a 'public-to-private concession'.<br />
At first glance, one would expect a private organisation<br />
to be fully independent of the government (grantor).<br />
Nevertheless, there could be circumstances in which an<br />
entity that is totally or partly state property has a certain<br />
degree of autonomy to carry out its activities, which is<br />
the case with <strong>Aquafin</strong>.<br />
The IFRIC has determined (in the basis for conclusion) that<br />
if a concession agreement such as the one between<br />
<strong>Aquafin</strong> NV and the Flemish Region is identical in all other<br />
respects to a concession agreement between a (purely)<br />
private organisation and the government, the operator<br />
(in casu <strong>Aquafin</strong>) can be treated as if it were a private entity.<br />
IFRIC 12 can therefore be applied.<br />
The service concession agreement<br />
The most important characteristic of services based on a<br />
service concession agreement is the nature of the services.<br />
The activities of the operator must be of ´public utility´<br />
(the so-called 'public service obligation'). The services<br />
related to the infrastructure must be provided by the<br />
operator to the public (in the broad sense of the term)<br />
within a pre-determined policy.<br />
The management agreement sets out the services<br />
between <strong>Aquafin</strong> and the government contractually<br />
and determines which ´public´ services are to be delivered,<br />
to wit, the expansion and the management of the<br />
household wastewater treatment infrastructure.<br />
<strong>Aquafin</strong> is responsible for at least part of the management<br />
of the infrastructure and associated services and does not<br />
operate solely as an agent on behalf of the Flemish Region.<br />
In that respect, we report that <strong>Aquafin</strong> does, indeed, run an<br />
operational risk, although a limited one, for example when it<br />
fails to achieve the planned delivery of infrastructure work.<br />
Furthermore, the management agreement states in Article<br />
48 how payment is to be done (i.e. an invoicing agreement<br />
between <strong>Aquafin</strong> and the user, especially the Flemish<br />
drinking water companies) and, implicitly, also the price<br />
that <strong>Aquafin</strong> may charge.<br />
And finally, at the end of the concession agreement,<br />
the complete infrastructure will be turned over to the<br />
government at no charge. That means that <strong>Aquafin</strong><br />
does not, in fact, 'control' the infrastructure as the IFRS<br />
understands 'control' and cannot sell or pledge it.<br />
The expected economic life of the assets is longer than<br />
the life of the concession.<br />
Lease agreements in which the group acts as lessor<br />
The project at Kapellen to carry out transport services is<br />
included under BE GAAP as part of the tangible fixed assets.<br />
Nevertheless, the Group does receive compensation via AWW<br />
for making those assets available. From that perspective,<br />
the group is a lessor in accordance with IAS 17 Leasing.<br />
Consequently, those assets are presented as a receivable on<br />
the group's balance (€6,824 k).<br />
2. Receivables on the management agreement (long and<br />
short term)<br />
In the context of the application of IFRIC 12, the group<br />
applies the <strong>financial</strong> asset model. That applies when the<br />
operator has an unconditional right to actively receive cash<br />
or other <strong>financial</strong> asset from the grantor.<br />
After all, in exchange for the performance in the context of<br />
the concession agreement, the group has an unconditional<br />
contractual right as an operator and is contractually<br />
compensated by the grantor (the Flemish Region).<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
39
40<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
The group considers that <strong>financial</strong> asset as a receivable in<br />
the category of "Loans and receivables". They are valued at<br />
the amortized cost price, which is calculated based on the<br />
effective interest method. Inasmuch as the repayment of<br />
the receivable is done at nominal value and no interest may<br />
be charged by the group, the effective interest rate is 0%.<br />
In practice, that constitutes valuation at nominal value.<br />
The receivables shown in this post related in particular to:<br />
• investments in (supramunicipal) sewer and treatment<br />
infrastructure, completed and in progress;<br />
• hydronaut studies, completed and in progress;<br />
• office buildings, purchased or acquired via a <strong>financial</strong><br />
lease;<br />
• computer and office equipment, furnishings, etc.;<br />
• alignment with the market value of the hedging<br />
structures (as per infra);<br />
• provisions for personnel benefits (as per infra);<br />
for a total amount of €1,552,870 k.<br />
Part of that amount (€88,684 k) is due within 1 year.<br />
Under BE GAAP, those assets are posted under tangible fixed<br />
assets.<br />
3. Financial fixed assets<br />
Under BE GAAP, the participation of the group in the<br />
subsidiary Aquaplus NV is shown here. In the consolidated<br />
IFRS <strong>financial</strong> <strong>statement</strong>, this participation expires vis-à-vis<br />
the equity of Aquaplus NV.<br />
Inasmuch as <strong>Aquafin</strong> NV has already posted a devaluation<br />
on the <strong>financial</strong> fixed asset, the value of the equity at<br />
Aquaplus NV is matched and there is therefore no impact<br />
on the results.<br />
4. Other <strong>financial</strong> assets<br />
The receivable for the provision of the assets as part of the<br />
project at Kapellen – the provision of transport services –<br />
in the amount of €6,357 k is shown here.<br />
The long-term receivables connected with the commercial<br />
projects in progress are reported in this section: €3,505 k.<br />
That receivable relates to all revenues still to be invoiced<br />
depending on the completion percentage of those projects.<br />
5. Stocks and orders in progress<br />
Under BE GAAP, projects on behalf of third parties<br />
(commercial projects in progress) are processed in accordance<br />
with the completed contract method. Expenses for projects<br />
that have not yet been delivered are activated under<br />
Orders in progress.<br />
Due to the conversion to IFRS, those projects are valued in<br />
accordance with the percentage of completion method<br />
and posted in the results pro rata with their percentage<br />
of completion. Concretely, €24,024 k in receivables (orders<br />
in progress) are shown in the results (- €24,024 k).<br />
6. Receivables of a maximum of 1 year (commercial receivables,<br />
other)<br />
Receivables are valued by the amortized cost price.<br />
The credit note still to be prepared for the drinking water<br />
companies / the Flemish Region is reported in IFRS in<br />
accordance with the IFRIC 12 receivable (receivables related<br />
to the concession agreement) (+ €10,137 k). The same<br />
reasoning applies to the credit note to be prepared with<br />
respect to the interest management (+ €1,186 k).<br />
The remaining difference with BE GAAP is the result of<br />
the consolidation of the subsidiary Aquaplus NV.<br />
7. Cash and cash equivalents<br />
The difference with BE GAAP is the result of the<br />
consolidation of the subsidiary Aquaplus NV.<br />
8. Net equity<br />
See infra: impact of the conversion on the consolidated<br />
equity at 1 January 2010.<br />
9. Pension obligations<br />
There are two types of pension schemes within the group:<br />
the defined contribution plan and the defined benefit plan.<br />
Liabilities with respect to defined contribution plan are<br />
applied against the profit and loss account immediately.<br />
The periodic premium payment is registered as a period<br />
cost. There is no difference here from the processing under<br />
BE GAAP.<br />
The debt or possible receivable from the defined benefit<br />
plan is shown in the balance <strong>statement</strong>. In such schemes,<br />
the amount in the balance <strong>statement</strong> (the net liability)<br />
matches the cash value of the gross liability, reduced by<br />
the fair value of the fund investments and adjusted for<br />
not-taken pension costs for past employment.
To be able to estimate future liabilities accurately, the<br />
projected unit credit methodology will be used, a specific<br />
actuarial calculation. The concrete impact of the conversion<br />
to IFRS amounts to €5,773 k.<br />
Early retirement schemes are also treated as defined<br />
benefit plans. The group shows a provision that is<br />
calculated in accordance with the project unit credit<br />
method. The concrete impact of the conversion to IFRS<br />
amounts to €510 k.<br />
Inasmuch as the provisions for personnel benefits fall<br />
under 'reasonable costs' as stipulated in the management<br />
agreement with the Flemish Region, a receivable equal<br />
to the amount of this provision has been booked for<br />
the Flemish Region. The impact on the consolidated equity<br />
is hereby neutralised.<br />
10. Other long-term debts<br />
The group uses derivatives to hedge interest risks arising<br />
from the financing activities. The difference with BE GAAP<br />
relates to the alignment as of 1 January 2010 with the market<br />
value of the hedging structures (see the explanation<br />
concerning the <strong>financial</strong> instruments): €19,992 k.<br />
The benefits and costs related to the interest management<br />
(hedging) are part of the financing charges and<br />
therefore fall under 'reasonable costs' as stipulated in<br />
the management agreement with the Flemish Region.<br />
For the amount of that alignment, an equal receivable was<br />
therefore booked to the Flemish Region. The impact on<br />
the consolidated equity is hereby neutralised.<br />
11. Commercial debts and other short-term debts<br />
Commercial debts and other liquid liabilities, with the<br />
exception of derivatives, are valued at the amortized cost<br />
price. That cost price is equivalent to the fair value of<br />
the compensation to be paid.<br />
Due to the conversion to IFRS, the commercial projects in<br />
progress are valued in accordance with the percentage of<br />
completion method and posted in the results pro rata with<br />
their percentage of completion. Concretely, €21,702 k in<br />
revenues (pre-payments received) are posted in the results.<br />
In accordance with IAS 10 – Events after the reporting Period<br />
– dividends allocated after the <strong>financial</strong> year are not posted<br />
as a liability as long as they are payable after the end of the<br />
<strong>financial</strong> year. The impact is €9,198 k.<br />
Debts related to taxes due (€121 k) are shown in the IFRS<br />
balance as a separate post.<br />
The remaining difference with BE GAAP is the result of the<br />
consolidation of the subsidiary Aquaplus NV.<br />
12. Deferred liability account<br />
The increase of the short-term <strong>financial</strong> liabilities relates to<br />
the active interest management (€204 k).<br />
IMPACT OF THE CONVERSION ON THE<br />
CONSOLIDATED EQUITY AT 1 JANUARY 2010<br />
The transition from BE GAAP to IFRS resulted in the<br />
reduction of the consolidated equity from €975.48 million<br />
to €177.62 million. That decrease from €797.86 million is<br />
explained in the table shown below.<br />
(in €000)<br />
BE GAAP - 31/12/2009 975,484<br />
Commercial projects in progress 1,183<br />
Dividends 9,198<br />
Capital subsidies -808,248<br />
IFRS - 01/01/2010 177,617<br />
Under BE GAAP, projects on behalf of third parties<br />
(commercial projects in progress) are processed in accordance<br />
with the completed contract method. Due to the conversion<br />
to IFRS, those projects are valued in accordance with the<br />
percentage of completion method and posted in the results pro<br />
rata with their percentage of completion. Concretely, €1,183 k<br />
in undelivered projects has been posted in the results; that is<br />
the result for all of the commercial projects in progress at 31<br />
December 2009.<br />
In accordance with IAS 10 – Events after the reporting<br />
Period – dividends allocated after the <strong>financial</strong> year are not<br />
posted as a liability as long as they are payable after the end of<br />
the <strong>financial</strong> year. The impact is €9,198 k.<br />
In implementation of the management agreement with<br />
the Flemish Region, the investments in (supramunicipal)<br />
sewer and treatment infrastructure were repaid over 15 years.<br />
The speed of repayments is higher than that of the write-offs.<br />
That resulted in a positive balance, which will be used to<br />
finance the write-offs further after the repayments have<br />
been made.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
41
42<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
With the approval of the Bookkeeping Standards<br />
Committee, this positive balance was booked to a special<br />
liability account, Repayment to the Flemish Region (capital<br />
subsidies). The amount of €808 million relates to all projects<br />
that were delivered up to the end of the <strong>financial</strong> year.<br />
As a result of the application of interpretation IFRIC 12 -<br />
Service Concession Agreements, these sewerage and treatment<br />
infrastructures (tangible fixed assets) are removed from the<br />
balance and replaced by the future credits from the Flemish<br />
Region (receivables). There will also no longer be any<br />
equivalent of the liability account Repayment to the Flemish<br />
Region (capital subsidies).<br />
IMPACT OF THE CONVERSION ON THE PROFIT<br />
AND LOSS ACCOUNT 2010<br />
The management contract with the Flemish Region<br />
stipulates that the compensation of <strong>Aquafin</strong> NV will take<br />
place on the basis of passing on all reasonable costs, increased<br />
by a compensation for the shareholders that is based on their<br />
contribution to the company’s equity. From this, it follows that<br />
the costs and revenues are a reflection of each other to a large<br />
extent. The conversion to IFRS has also not had any impact on<br />
the results for the activities covered by the concession<br />
agreement.<br />
Inasmuch as the IFRS balance of the group does not<br />
recognise any tangible fixed assets, the write-offs and<br />
therefore also the equivalent of those write-off costs are<br />
neutralised in the turnover in the IFRS <strong>statement</strong> of results.<br />
RESULTS ACCOUNT<br />
BE GAAP IFRS conversion IFRS consolidated<br />
(in €000) 31/12/2010 01/01/2010<br />
OPERATING INCOME 362,540 -107,781 254,759<br />
Turnover 336,891 -88,935 247,956<br />
Changes to the orders in progress 20,229 -20,229<br />
Produced fixed assets 12 -12<br />
Other operating income 5,409 1,394 6,803<br />
OPERATING EXPENSES -295,899 110,556 -185,343<br />
Commercial goods, raw materials and consumables used -82,981 -112 -83,092<br />
Services and miscellaneous goods -42,602 -61 -42,662<br />
Salaries, social security contributions and pensions -55,982 0 -55,982<br />
Write-offs to tangible fixed assets -111,261 111,261<br />
Devaluations of orders in progress and trade receivables 245 -457 -212<br />
Provisions for risks and costs 75 -75<br />
Other operating costs -3,394 0 -3,394<br />
OPERATING RESULTS 66,641 2,775 69,416<br />
Financial results -58,656 -2,800 -61,456<br />
Profit from ongoing operations before taxes 7,985 -25 7,960<br />
Extraordinary results 2 -2<br />
Profit for the <strong>financial</strong> year before taxes 7,987 -27 7,960<br />
Income taxes -910 397 -513<br />
PROFIT FOR THE FINANCIAL YEAR 7,078 369 7,447
The only impact that the conversion has on results<br />
concerns the results of the projects in hand is on behalf of<br />
third parties (commercial projects in progress).<br />
On the date of the switch (31/12/2010), the group did not<br />
have the necessary information to be able to apply the<br />
percentage of completion methodology for those projects.<br />
In 2010, those projects were still being processed in<br />
accordance with the BE GAAP completed contract method.<br />
The concrete impact of the conversion to IFRS amounts<br />
to €369 k.<br />
From <strong>2011</strong>, those projects were being processed<br />
consistently in accordance with the percentage of completion<br />
method also under BE GAAP.<br />
Notes to the consolidated balance sheet<br />
EXPLANATION 5.0. CONCESSION CONTRACTS<br />
(IFRIC 12<br />
IFRIC 12 concerning services based on a concession<br />
agreement is applied in the consolidated <strong>financial</strong> <strong>statement</strong><br />
of <strong>Aquafin</strong>.<br />
n<br />
<strong>Aquafin</strong> activities<br />
<strong>Aquafin</strong> NV was established in 1990 by the Flemish Region<br />
to accelerate the development of the supramunicipal<br />
sewerage infrastructure. In order to achieve that objective,<br />
the Flemish Region sets out <strong>Aquafin</strong>'s assignments every year<br />
in a programme. The Vlaamse Milieumaatschappij (Flemish<br />
Environmental Agency) monitors <strong>Aquafin</strong>'s economic and<br />
ecological results. For the execution of this assignment,<br />
a management agreement has been drawn up between<br />
<strong>Aquafin</strong> and the Flemish Region. Amendments to the original<br />
management agreement are set out in addenda.<br />
In the context of the management agreement, <strong>Aquafin</strong><br />
collects the wastewater from the Flemish households in main<br />
sewers and transports it to treatment plants. For that purpose,<br />
<strong>Aquafin</strong> first expanded the necessary infrastructure:<br />
collectors for wastewater, pumping stations and wastewater<br />
treatment plants. <strong>Aquafin</strong> prefinances the projects awarded<br />
and the drinking water companies repay the investments.<br />
From projects delivered from 1 January 2009, the repayment<br />
term is 15 years for the electromechanical works and 30 years<br />
for the construction works.<br />
<strong>Aquafin</strong> is also responsible for the maintenance and<br />
operation of the supramunicipal sewer systems and the<br />
wastewater treatment plants. The treated wastewater must<br />
comply with Flemish and European standards.<br />
Outside the management agreement, <strong>Aquafin</strong> has also<br />
developed a specific offering for cities and municipalities.<br />
Several cities and municipalities have outsourced the<br />
complete installation and maintenance of their sewers to<br />
<strong>Aquafin</strong>. Several companies also have their wastewater<br />
treated by <strong>Aquafin</strong>.<br />
The most important part of the <strong>Aquafin</strong> assets is used<br />
in the context of a concession agreement. More specifically,<br />
it concerns assets that are used to carry out the tasks under<br />
the management agreement with the Flemish Region.<br />
n Applicability of IFRIC 12<br />
The interpretation IFRIC 12 - Service Concession Agreements<br />
applies to public-private agreements if the following<br />
conditions are satisfied:<br />
• the grantor controls or regulates the services that the<br />
operator is required to provide with the infrastructure,<br />
whom those services are to be delivered to, and the price;<br />
• the grantor controls through ownership the ultimate<br />
right; in other words, the grantor has control over any<br />
significant residual value in the infrastructure at the end<br />
of the life of the agreement.<br />
Infrastructure assets within the scope of the agreement<br />
are assets built or acquired for use within the context of<br />
the concession agreement or existing infrastructure to which<br />
the operator has been granted access.<br />
The interpretation is based on the concept of 'control',<br />
i.e. whoever controls the right of use of the infrastructure.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
43
44<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
In summary, we can therefore state that the following<br />
criteria must be satisfied in order to fall under the scope of<br />
the interpretation (IFRIC 12 §5,7);<br />
n<br />
• the agreement is a public-to-private concession;<br />
• the grantor has control over or regulates the services<br />
that the operator must provide with the help of<br />
the infrastructure;<br />
• the grantor has control over any significant remaining<br />
interest in the infrastructure;<br />
• the infrastructure is built or acquired by the operator for<br />
the purpose of using it in the context of the concession<br />
agreement;<br />
• the contract between the operator and the grantor<br />
determines the price at which the services are to be<br />
provided.<br />
Analysis of the concession agreement<br />
Service Concession Agreement<br />
One of the characteristics of a service concession<br />
agreement is the nature of the services. The activities of<br />
the operator must be a public service. (the so-called ‘public<br />
service nature of the obligation’).<br />
The services related to the infrastructure must be provided<br />
by the operator to the public (in the broad sense of the term)<br />
within a pre-determined policy. The management agreement<br />
sets out the services between <strong>Aquafin</strong> and the government<br />
contractually and determines which ´public´ services are to be<br />
delivered, to wit, the expansion and the management of<br />
the household wastewater treatment infrastructure.<br />
A second condition is that <strong>Aquafin</strong> is responsible for at<br />
least part of the management of the infrastructure and<br />
associated services and does not operate solely as an agent on<br />
behalf of the Flemish Region. In that respect, we report<br />
that <strong>Aquafin</strong> does, indeed, run an operational risk, although a<br />
limited one, for example when it fails to achieve the planned<br />
delivery of infrastructure work.<br />
A third condition concerns the payments for the services.<br />
The management agreement states in Article 48 how<br />
payment is to be done (i.e. an invoicing agreement between<br />
<strong>Aquafin</strong> and the user, especially the Flemish drinking water<br />
companies) and, implicitly, also the price that <strong>Aquafin</strong> may<br />
charge.<br />
And finally, there is a condition concerning the ownership<br />
of the infrastructure at the end of the agreement. At the end<br />
of the concession agreement, the complete infrastructure will<br />
be turned over to the government at no charge. That means<br />
that <strong>Aquafin</strong> does not, in fact, 'control' the infrastructure<br />
as the IFRS understands 'control' and cannot sell or pledge it.<br />
The expected economic life of the assets is longer than the life<br />
of the concession.<br />
Interpretation IFRIC 12 - Service Concession Agreements<br />
as ratified on 25 May 2009 by the European Commission,<br />
applies to <strong>Aquafin</strong> with respect to the activities under the<br />
management agreement.<br />
Within IFRIC 12, that kind of infrastructure is recognised as<br />
<strong>financial</strong> assets (<strong>financial</strong> asset model) in <strong>Aquafin</strong>'s case, not<br />
as tangible fixed assets.<br />
n<br />
Financial assets model<br />
The operator posts a <strong>financial</strong> asset to the degree that an<br />
unconditional contractual right exists to cash or other<br />
<strong>financial</strong> assets for the delivery of services. A contractual right<br />
exists if the grantor contractually ensures the payment of:<br />
a) specified or calculable amounts, or<br />
b) any negative difference between amounts received from<br />
users of the public utility and specified or calculable<br />
amounts, even if the payment is made dependent on<br />
the condition that the operator ensure that the<br />
infrastructure satisfy specified quality or efficiency<br />
requirements.<br />
The various compensations that the Flemish Region owes<br />
to <strong>Aquafin</strong> are stipulated in Art. 43 of the management<br />
agreement between <strong>Aquafin</strong> and the Flemish Region and<br />
fit within the aforementioned conditions in order to meet<br />
the definition of <strong>financial</strong> assets.<br />
Art. 43 of the management agreement states:<br />
"To fulfil its tasks under this agreement, to wit, the creation<br />
and operation of sewer water treatment infrastructure,<br />
<strong>Aquafin</strong> is entitled to compensation from the Flemish Region<br />
that must cover all reasonable costs incurred and, with due<br />
regard for the risk taken, ensure a minimum acceptable return<br />
for the shareholders.
This compensation covers all actual reasonable costs<br />
incurred by <strong>Aquafin</strong> within the meaning of Art. 35 of this<br />
agreement, as well as all levies and taxes owed by <strong>Aquafin</strong> for<br />
the execution of this agreement, including environmental levies,<br />
all payments due to third parties and all of the payments owed<br />
to the Flemish Region with the exception of fines, compensation<br />
for damages for late delivery in accordance with the provisions<br />
of articles 41.3, 41.4 and 41.5 of this agreement, lump-sum<br />
payments under art. 41 of this agreement and compensation<br />
for damages to third parties due to illegal acts, and are paid in<br />
accordance with this chapter.<br />
Without prejudice to the provisions of Art. 18 of this<br />
agreement, this payment comprises four elements, to wit,<br />
recovery of (a) Investment Spending, (b) Working Expenses,<br />
(c) Fixed Costs and (d) Financing Costs."<br />
Art. 43 gives an unconditional contractual right to receive<br />
payment from the Flemish Government (in its capacity as<br />
grantor). The grantor also has few or no possibilities for<br />
avoiding payment; it is effectively enforceable in law.<br />
The primary impact of the model on the <strong>financial</strong> position<br />
and results of the group concerns the treatment of its tangible<br />
fixed assets. The tangible fixed assets that fall within the<br />
scope of this interpretation are not recognised as tangible<br />
fixed assets, but as <strong>financial</strong> assets that comprise the<br />
payments to be received from operations and establishment<br />
of the concession.<br />
As per Art. 43 of the management agreement, the contractual<br />
rights of <strong>Aquafin</strong> are unconditional and therefore satisfy the<br />
definition of the <strong>financial</strong> assets model.<br />
n<br />
IFRIC-12 receivables shown in the balance<br />
Long-term receivables management agreement<br />
Long-term receivables (i.e. receivables over more than<br />
one year) as a result of the application of IFRIC 12 comprise<br />
the following categories:<br />
The tangible fixes asset shown in the IFRIC 12 receivables<br />
comprises:<br />
• Wastewater treatment infrastructure delivered to the<br />
Flemish Region. For the part of those investment projects<br />
and replacement investments not yet repaid on the<br />
reporting date, and that will be received over more than<br />
a year, the group recognises a long-term receivable with<br />
respect to the drinking water companies/the Flemish<br />
Region, valued at an amortized cost price.<br />
• Infrastructure taken over from the Vlaamse Milieu -<br />
maatschappij (Flemish Environmental Agency). The group<br />
is also entitled to receive payment from the Flemish<br />
Region in the amount of the as yet not repaid part and<br />
valued at the amortized cost price. The part that is to be<br />
recovered over more than one year is shown in the longterm<br />
receivables.<br />
• Hydronaut studies are studies that are carried out to<br />
develop a correct design of the associated supra -<br />
municipal investment project. These studies are also<br />
carried out in the context of the management of existing<br />
infrastructure. They are charged over a period of 15 years<br />
to the Flemish Region/the drinking water companies.<br />
For the part of those studies not yet repaid on the<br />
reporting date, and that will be recovered over more than<br />
one year, a long-term receivable is recognised.<br />
• Investments in hardware, software, laboratory equipment,<br />
furniture, materials and equipment required for the<br />
functioning of the head office and investments in<br />
hardware, software, laboratory equipment, replacement<br />
investments, electromechanics, extraordinary maintenance<br />
of construction and electromechanics, furniture, etc.,<br />
are charged to the Flemish Region/the drinking water<br />
companies pro rata with the write-offs booked. For the<br />
part of those investments not yet repaid on the reporting<br />
date, and that will be recovered over more than one year,<br />
a long-term receivable is recognised.<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
Tangible fixed assets included in IFRIC 12 - receivables 1,917,827 1,678,636 1,438,906<br />
Provisions for pensions 6,313 6,644 6,283<br />
Fair value <strong>financial</strong> instruments 132,419 42,482 18,996<br />
TOTAL 2,056,559 1,727,763 1,464,186<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
45
46<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
• Investments in the head office building (Dijkstraat 8).<br />
They are charged to the Flemish Region/the drinking<br />
water companies pro rata with the payment of the loan<br />
taken out for this purpose. For the part of those<br />
investments not yet repaid on the reporting date, and<br />
that will be recovered over more than one year, a longterm<br />
receivable is recognised.<br />
• Chargeable costs of the two buildings that the group<br />
leases. The leasing contracts satisfy the criteria of<br />
<strong>financial</strong> leasing. The leasing costs are charged to the<br />
Flemish Region/the drinking water companies pro rata<br />
with the write-offs. For the part of those leased buildings<br />
not yet repaid on the reporting date, and that will be<br />
recovered over more than one year, a long-term<br />
receivable is recognised.<br />
The total book value for leasing can be broken down<br />
into an IFRIC 12 short-term receivable of €219 k (i.e. the<br />
annual write-off charged to the Flemish Region/the<br />
drinking water companies) and an IFRIC 12 long-term<br />
receivable for the part that will only be recovered from<br />
the Flemish Region/the drinking water companies in<br />
the years to follow.<br />
• Assets under construction. In addition to the completed<br />
projects, the group has a large number of projects in<br />
progress and therefore a significant amount in assets<br />
under construction. Also, the group has an unconditional<br />
contractual right to receive payment from the Flemish<br />
Government for those assets. A receivable is recognised<br />
for their value.<br />
The provisional pensions concern the defined contribution<br />
plan and early-retirement plans.<br />
• Provision for defined contribution plans. <strong>Aquafin</strong> has<br />
two types of pension schemes: a defined contribution<br />
plan and a defined benefit plan. All movements related<br />
to the defined contribution plan are recognised in P&L.<br />
For the obligations concerning the defined benefit plan,<br />
an actuarial calculation as per IAS 19 was carried out,<br />
as per explanation 5.10.<br />
Inasmuch as, in accordance with the management<br />
agreement, the group has an unconditional contractual<br />
right to receive compensation for the provision for the<br />
defined contribution plan from the Flemish Region/<br />
the drinking water companies, they are shown as<br />
receivables.<br />
• Provision for the early-retirement pension. As per IAS 19,<br />
an actuarial calculation of the provision for earlyretirement<br />
pensions was carried out. The explanation<br />
concerning that calculation is provided in explanation<br />
5.10. Inasmuch as, in accordance with the management<br />
agreement, the group has an unconditional contractual<br />
right to receive compensation for the provision for the<br />
benefit plan from the Flemish Region/the drinking water<br />
companies, they are shown as receivables.<br />
Fair value <strong>financial</strong> instruments<br />
• Inasmuch as the group, in accordance with the<br />
management agreement, is entitled to receive<br />
compensation for the costs of financing, changes in<br />
the market value of the <strong>financial</strong> instruments are<br />
recognised as receivables vis-à-vis the unrealised results.<br />
Explanation concerning the calculation and the changes<br />
in that market value are provided in explanation 5.9.<br />
Short-term receivables management agreement<br />
Short-term receivables (i.e. receivables due within a<br />
maximum of one year) as a result of the application of IFRIC 12<br />
comprise the following categories:<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
Tangible fixed assets included in IFRIC 12 - receivables 116,681 115,430 99,144<br />
Other -5,039 -7,994 -10,460<br />
TOTAL 111,643 107,436 88,684
The tangible fixes asset shown in the IFRIC 12 receivables<br />
comprises:<br />
• wastewater treatment infrastructure delivered to the<br />
Flemish Region;<br />
• infrastructure taken over from the Vlaamse<br />
Milieumaatschappij (Flemish Environmental Agency);<br />
• hydronaut studies;<br />
• investments in hardware, software, laboratory equipment,<br />
furniture, materials and equipment required for the<br />
operations of the head office and investments in hardware,<br />
software, laboratory equipment, electromechanical<br />
replacement investments, extraordinary maintenance<br />
for construction and electromechanics, furniture, etc.,<br />
required for the operational activities;<br />
• investments in the head office building (Dijkstraat 8);<br />
• chargeable costs of the two buildings that the group<br />
leases.<br />
A description of those posts has been provided under the<br />
IFRIC 12 long-term receivables. For the part of those receivables<br />
that are to be recovered within the year, a short-term<br />
receivable has been recognised. Those receivables are<br />
effectively received in year n+1.<br />
The other IFRIC 12 short-term receivables relate primarily<br />
to credit notes/invoices for operating expenses that are yet to<br />
be prepared. After invoicing the drinking water companies on<br />
the basis of the estimates throughout the year, the total<br />
invoicing is specified in detail at year-end. For the corrections<br />
with respect to the previously invoiced amounts, the invoices/<br />
credit notes that are still to be prepared are recognised in<br />
the balance.<br />
Receivables with<br />
Receivables due within a remaining period Receivables with<br />
a period of more than 1 year of more than 1 and a remaining period<br />
IFRIC 12 receivables which expire within the year less than 5 years of more than 5 years Total<br />
(in €000)<br />
IFRIC 12 RECEIVABLES PER YEAR OF EXPIRATION<br />
At 31/12/<strong>2011</strong> 111,643 439,184 1,617,375 2,168,202<br />
At 31/12/2010 107,436 407,349 1,320,414 1,835,199<br />
At 01/01/2010 88,684 356,540 1,107,646 1,552,870<br />
EXPLANATION 5.1 TO THE 'OTHER FINANCIAL<br />
ASSETS' POST<br />
The other <strong>financial</strong> assets amounted to €27,440 k at 31<br />
December <strong>2011</strong>. With respect to the balance at 31 December<br />
2010, that represented an increase of €17,067 k.<br />
ASSETS<br />
(in €000) Explanation <strong>2011</strong> 2010 At 1 January 2010<br />
FIXED ASSETS<br />
Other <strong>financial</strong> assets 5.1 27,440 10,373 9,884<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
47
48<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Within the other <strong>financial</strong> assets, we distinguish between<br />
several types.<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
Financial assets available for sale 100 78 0<br />
Warranties 3 2 2<br />
Long-term receivables for municipal transport services 5,781 6,209 6,357<br />
Payments still to be invoiced with respect to <strong>Aquafin</strong>-commercial projects 16,044 4,036 3,505<br />
Payments still to be invoiced with respect to Aquaplus-commercial projects 191 46 19<br />
Long-term receivables with respect to provisions - intervention of third parties 5,321 0 0<br />
TOTAL 27,440 10,373 9,884<br />
n<br />
Financial assets available for sale<br />
In 2010, the group joined the drinking water company<br />
VMW in the Rio-P West Flanders water service and the East<br />
Flanders Rio-P water service through contribution in kind.<br />
More concretely, the group provided databases containing the<br />
digital inventory of the sewer systems of the municipalities<br />
concerned. For each database provided, the fair value was<br />
determined at the moment of joining Rio-P, including the value<br />
of the expertise provided. That valuation was coordinated with<br />
and invoiced to VMW as main shareholder of Rio-P.<br />
In 2010, drinking water companies AWW and TMVW<br />
entered into a structural collaboration under the name 'waterlink'<br />
with a subsidiary, 'rio-link' being established within it.<br />
On 8 March <strong>2011</strong>, the board of directors signed a shareholders'<br />
agreement between water-link and <strong>Aquafin</strong> with respect to<br />
collaborating in rio-link. <strong>Aquafin</strong> thereby acquired one-third of<br />
the shares in rio-link in the amount of €22,000. In view of the<br />
negligible material interest in that participation, it is shown<br />
under '<strong>financial</strong> investments available for sale'.<br />
n<br />
Long-term receivables for municipal transport services<br />
In the context of the commercial contracts with the<br />
municipalities, <strong>Aquafin</strong> is assuming responsibility for<br />
transport services for which a system of payment modalities<br />
can be elaborated at the municipalities' request. For the<br />
projects carried out and repaid by the municipalities<br />
concerned over time in this context, the group recognises a<br />
long-term receivable in the amount of the part that is to be<br />
recovered over more than one year from the municipalities<br />
concerned.<br />
n<br />
Payments still to be invoiced with respect to <strong>Aquafin</strong><br />
commercial projects<br />
In addition to the projects within the scope of the<br />
management agreement, <strong>Aquafin</strong> also carries out commercial<br />
projects. The “Rio-Totaal” service package that <strong>Aquafin</strong> offers<br />
to the municipalities is modular. It makes it possible for the<br />
municipalities to call on <strong>Aquafin</strong> to assist with those aspects<br />
of expansion and management of a sewer system for which<br />
there is a need. That modular offering is primarily interesting<br />
for cities and municipalities with a good-sized in-house<br />
technical department that wishes to acquire specific support<br />
for one or more aspects of sewer management.<br />
In addition to that modular offering, the municipalities can<br />
also opt for a total solution, the “Rio-Totaal” service package<br />
in the form of a concession of public service. That type of<br />
collaboration makes it possible for the cities and<br />
municipalities to lay their own accents and to decide on<br />
timing, budgets, priorities and ways of working. To bring<br />
integrated drinking-water policy one step closer, <strong>Aquafin</strong> has<br />
signed agreements for structural collaboration with drinking<br />
water companies. Municipalities can also decide to satisfy<br />
their sanitation obligation in this way.<br />
Based on the estimated percentage of completion of<br />
the commercial projects at 31 December <strong>2011</strong>, €63,869k in<br />
revenues have been recognised in <strong>2011</strong> with respect to those<br />
projects. A major part of those revenues, to wit, €16,044 k,<br />
concerns payments that were yet to be invoiced at the end of<br />
<strong>2011</strong>. Due to the strong increase in the commercial projects<br />
portfolio, that post shows an increase by €12,008 k in<br />
comparison with the end of 2010.
(in €000) <strong>2011</strong> 2010<br />
PROJECTS IN PROGRESS ON BEHALF OF THIRD PARTIES<br />
Revenues charged for the <strong>financial</strong> year 63,869 33,421<br />
Costs charged for the <strong>financial</strong> year 62,022 31,542<br />
Profit for the <strong>financial</strong> year 1,847 1,879<br />
n<br />
Payments still to be invoiced with respect to <strong>Aquafin</strong>’s<br />
commercial projects<br />
At 31 December <strong>2011</strong>, the total of payments that had not<br />
yet been invoiced – based on the estimated percentage of<br />
completion of those commercial projects on closing date –<br />
was €191 k. At the end of 2010, those receivables were €46k.<br />
n<br />
Long-term receivables related to provisions - intervention<br />
of third parties<br />
Until 2010, a net receivable was included under the longterm<br />
liabilities with respect to the provisions. Starting in <strong>2011</strong>,<br />
the gross amount of the liability was shown under the<br />
provisions and the recoveries from third parties were shown<br />
under the other <strong>financial</strong> tangible assets. That explains the<br />
increase of this section by €5,321 k.<br />
EXPLANATION 5.2 COMMERCIAL AND OTHER RECEIVABLES<br />
The commercial and other receivables amounted to<br />
€27,188k at the end of <strong>financial</strong> year <strong>2011</strong>. That meant<br />
an increase by €6,711k in comparison with the balance at<br />
31 December 2010.<br />
(in €000) Explanation <strong>2011</strong> 2010 At 1 January 2010<br />
Trade receivables and other receivables 5.2 27,188 20,477 25,226<br />
The commercial and other receivables can be broken down<br />
into the following categories:<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
Short-term receivables for municipal transport services 494 473 473<br />
Trading creditors 21,716 15,843 22,237<br />
Miscellaneous receivables 4,978 4,160 2,515<br />
TOTAL 27,188 20,477 25,226<br />
n<br />
Short-term receivables for municipal transport services<br />
In the context of the commercial contracts with the<br />
municipalities, <strong>Aquafin</strong> is assuming responsibility for<br />
transport services for which a system of payment modalities<br />
can be elaborated at the municipalities' request. For the<br />
projects carried out and repaid by the municipalities<br />
concerned over time in this context, the group recognises a<br />
short-term receivable in the amount of the part that is to be<br />
recovered within one year from the municipalities concerned.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
49
50<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
n<br />
Trading creditors<br />
The table below shows the gross and net commercial<br />
receivables:<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
TRADING CREDITORS<br />
Gross book value 23,219 17,091 23,730<br />
Devaluations for dubious creditors -1,503 -1,247 -1,492<br />
NET BOOK VALUE 21,716 15,843 22,237<br />
The commercial debtors are not interest-bearing and,<br />
in general, have a payment period of 30 to 60 days. The table<br />
below shows the outstanding commercial receivables by<br />
due date.<br />
(in €000)<br />
Gross book Not Net book<br />
value expired Expired Devaluations value<br />
90 days<br />
31/12/<strong>2011</strong> 23,219 15,867 5,384 500 340 1,127 -1,503 21,716<br />
31/12/2010 17,091 13,611 341 509 986 1,645 -1,247 15,843<br />
1/01/2010 23,730 20,019 1,287 139 1,537 748 -1,492 22,237<br />
n<br />
Miscellaneous receivables<br />
The various receivables consist primarily of recoverable VAT.<br />
EXPLANATION 5.3 TO THE 'OTHER FINANCIAL LIQUID ASSETS' POST<br />
The other <strong>financial</strong> liquid assets amounted to €1,476 k at 31<br />
December <strong>2011</strong>. With respect to the balance at 31 December<br />
2010, that represented an increase of €563 k.<br />
This concerns the deferred accounts that concern the<br />
pre-paid costs and the payments due from interest and<br />
transport services.<br />
(in €000) Explanation <strong>2011</strong> 2010 Per 1 januari 2010<br />
Other <strong>financial</strong> liquid assets 5.3 1,476 913 452
EXPLANATION 5.4 FUNDS AND CASH EQUIVALENTS<br />
(in €000) Explanation <strong>2011</strong> 2010 At 1 January 2010<br />
Funds and cash equivalents 5.4 71,763 4,259 38,340<br />
Partly due to the success of the public emission of a<br />
debenture loan in the fall of 2009, there was a limited cash<br />
surplus at the end of 2009. These temporary surpluses were<br />
utilised in the course of 2010 to finance projects that<br />
were ready to be launched.<br />
In <strong>2011</strong>, <strong>Aquafin</strong> found itself facing greater financing<br />
requirements than it had in previous years due to the<br />
purchase of property and plants of the Vlaamse Milieu -<br />
maatschappij (Flemish Environmental Agency) in the context<br />
of addendum no. 7 of the management agreement.<br />
The banks were limited in their ability to provide additional<br />
loans because they were themselves confronted with<br />
increased costs and new regulations. Belgian institutional<br />
investors, on the other hand, were very interested in financing<br />
<strong>Aquafin</strong>. That opportunity was therefore utilised to the full:<br />
€285 million in financing was obtained via that channel.<br />
Inasmuch as it was not possible to apply that full amount to<br />
financing projects immediately, there was a temporary cash<br />
surplus and investments of nearly €53 million were made.<br />
In 2012, those funds are to be used to finance projects.<br />
EXPLANATION 5.5 CAPITAL<br />
At the end of <strong>financial</strong> year <strong>2011</strong>, capital amounted to<br />
€248,400,024, of which 210,900,006 was fully deposited;<br />
at the end of 2010, the capital was equal to the deposited<br />
capital: €198,400,000.<br />
In the context of the financing of the purchase of plants of<br />
the Vlaamse Milieumaatschappij (Flemish Environmental<br />
Agency) by <strong>Aquafin</strong>, the capital was increased by €50,000k<br />
on 13 December <strong>2011</strong>. Of that amount, €12.500 k was<br />
deposited. In the same context, a capital deposit in the<br />
amount of €48,971 k was also done in 2010.<br />
The capital is represented by 1,001,613 shares without<br />
nominal value. The shares are issued by name and are<br />
recorded in a shares register by name. As of 1 January 2010,<br />
the capital was represented by 800,000 shares, of which<br />
1,476 were fully paid up and 798,524 were paid up to a level<br />
of 75.27%. Following the capital pay-up on 2 December 2010,<br />
all 800,000 shares were fully paid up. After the capital<br />
increase on 13 December <strong>2011</strong>, the capital consists of<br />
800,000 fully paid-up shares and 201,613 shares that are<br />
paid up to a level of 25%.<br />
EXPLANATION 5.6. GROUP RESERVES<br />
The group reserves at the end of <strong>financial</strong> year <strong>2011</strong><br />
amounted to €27,741 k; that is an increase of €1,304 k in<br />
comparison with the balance at 31 December 2010.<br />
That increase is primarily due to an increase of €1,000 k in<br />
the available reserve to provide the necessary funds for<br />
possible participations in structural collaborations and the<br />
activities of Aquaplus N.V. In addition, there was a logical<br />
increase in the legal reserve.<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
OTHER EQUITY COMPONENTS<br />
Required reserves 11,036 10,556 10,201<br />
Available reserve 8,600 7,600 7,600<br />
Profit carried forward 8,105 8,281 10,387<br />
TOTAL 27,741 26,437 28,188<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
51
52<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
The group reserves consist of the legal reserve, the available<br />
reserve and the deferred profit.<br />
The legal reserve is topped-up annually until it reaches a<br />
level equal to 10% of the capital. In accordance with Section<br />
319 of the Companies Code, 5% of the after-tax profit is put<br />
into reserve annually.<br />
The group has had an available reserve of €7,600 k for some<br />
time now. In <strong>2011</strong>, that was increased by €1,000 k to provide<br />
the funds necessary for the possible participation in structural<br />
cooperative ventures and the activities of Aquaplus N.V.<br />
The deferred profit amounted to €10,387 k on 1 January 2010;<br />
€8,281 k on 31 December 2010 and €8,105 k on 31 December <strong>2011</strong>.<br />
Under BE GAAP, projects on behalf of third parties<br />
(commercial projects in progress) are processed in accordance<br />
with the completed contract method until 31 December 2010.<br />
Due to the conversion to IFRS, those projects are valued in<br />
accordance with the percentage of completion method and<br />
posted in the results pro rata with their percentage of<br />
completion. Concretely, €1,183 k in undelivered projects were<br />
shown in the results on 1 January 2010; at 31 December 2010,<br />
that amount was €1,552 k. Starting in <strong>2011</strong>, the valuation rules<br />
were aligned with the IFRS and those projects were also<br />
valued under BE GAAP according to the percentage of<br />
completion method.<br />
In accordance with IAS 10 - Events after the reporting<br />
Period dividends allocated after the <strong>financial</strong> year are not<br />
posted as a liability as long as they are payable after the end<br />
of the <strong>financial</strong> year. The impact amounted to €9,198 k on<br />
1 January 2010; €6,724 k on 31 December 2010 and €8,096 k<br />
on 31 December <strong>2011</strong>.<br />
EXPLANATION 5.7. CONSOLIDATED OVERVIEW OF REALISED AND UNREALISED RESULTS<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
NET PROFIT 8,028 7,447<br />
UNREALISED RESULTS<br />
Net increase in value of cash flow hedges 5.9 -79,711 -20,303<br />
Charge-through via Management Agreement receivables 5.9 79,711 20,303<br />
0 0<br />
Actuarial profits and losses on defined benefit plans 5.11 564 172<br />
Charge-through of IFRIC 12 receivables 5.11 -564 -172<br />
0 0<br />
Unrealised results after taxes 0 0<br />
TOTAL REALISED AND UNREALISED RESULTS AFTER TAXES 8,028 7,447<br />
The unrealised results with respect to cash flow hedges<br />
must be considered as recyclable and the actuarial profits and<br />
losses on defined benefit plans as non-recyclable.
EXPLANATION 5.8 INTEREST-BEARING LOANS - LONG-TERM AND SHORT-TERM<br />
FINANCIAL LIABILITIES<br />
n<br />
Overview of interest-bearing loans - long-term and shortterm<br />
at 31 December <strong>2011</strong><br />
At 31 December <strong>2011</strong>, the outstanding <strong>financial</strong> debts can<br />
be broken down as follows:<br />
• <strong>financial</strong> long-term debts, more than 1 year: €1,568,254 k;<br />
• <strong>financial</strong> long-term debts, due within 1 year: €157,904 k;<br />
• <strong>financial</strong> short-term debts: €82,006 k.<br />
Detail of the <strong>financial</strong> debts by category:<br />
Interest rate %<br />
(in €000) (average) Term <strong>2011</strong> 2010 At 1 January 2010<br />
Long-term bank debt under allocation 4.39% 2012-2041 1,459,216 1,089,985 1,037,976<br />
Private placement 4.25% 2013 100,000 100,000 100,000<br />
Retail bond 4.00% 2015 150,000 150,000 150,000<br />
Long-term bank debt purchase of Dijkstraat 8 4.79% 2029 8,302 8,510 8,700<br />
Long-term bank debt commercial activities 4.46% 2024-2025 6,518 6,898 6,932<br />
Leasing debts 7.48% 2015-2016 2,122 2,448 2,740<br />
TOTAL LONG-TERM FINANCIAL DEBTS 1,726,158 1,357,841 1,306,348<br />
Short-term bank debts (Commercial Paper) 1.35% 2012 73,000 140,600 30,500<br />
Short-term bank debt commercial activities 1.66% 2012 9,006<br />
Total short-term <strong>financial</strong> debts 82,006 140,600 30,500<br />
TOTAL LONG-TERM & SHORT-TERM FINANCIAL DEBTS 1,808,164 1,498,441 1,336,848<br />
n Long-term bank debts under allocation at 31 December <strong>2011</strong><br />
The long-term credits are used to finance the investments<br />
that are being repaid over time by the Flemish Region and,<br />
since 1 January 2005, by the drinking-water companies with<br />
the Flemish Region as co-debtor. Long-term financing is based<br />
on the allocation agreement. It defines that the balance of<br />
the long-term credits must be smaller than the claims that<br />
<strong>Aquafin</strong> has on the drinking water companies, respectively<br />
the Flemish Region. These claims consist of the investment<br />
projects that have not been paid, but that have already<br />
been delivered.<br />
In 2010 and <strong>2011</strong>, <strong>Aquafin</strong> was directed by the Flemish<br />
Region to purchase assets from the Vlaamse Milieu -<br />
maatschappij (Flemish Environmental Agency). Initially, the<br />
financing for the purchase was bridged by short-term<br />
borrowing. At the end of <strong>2011</strong>, the commercial paper was<br />
reduced sharply as part of the long-term financing of<br />
those VMM assets. The share of long-term loans has therefore<br />
increased significantly, from €1,090 million at the end<br />
of 2010 to €1,459 million at the end of <strong>2011</strong>.<br />
At 31 December <strong>2011</strong>, a nominal amount of €2,542,348 k<br />
was taken up, of which €1,459,216 k has not yet been repaid.<br />
In <strong>2011</strong>, <strong>Aquafin</strong> was able to meet its long-term financing<br />
requirements with loans from the European Investment Bank<br />
(€75 million), the commercial banks (€150 million) and new<br />
institutional investors (€285 million).<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
53
54<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
In general, the loans have the following structure:<br />
• take-up in EUR<br />
• fixed interest for the full life of the loan or variable<br />
interest hedged with a maximum ceiling interest rate<br />
• term of 15 years (up to 2008) and 30 years (from 2009)<br />
• equal half-yearly capital repayments<br />
• semi-annual interest payments.<br />
n Bond loans at 31 December <strong>2011</strong><br />
Bond issue 2006 (Private placement)<br />
On 30 May 2006, <strong>Aquafin</strong> issued a seven-year bond loan in<br />
the amount of €100 million. Those funds are now being used<br />
to fund the works in progress.<br />
The bond loan issued by <strong>Aquafin</strong> has the following<br />
characteristics:<br />
• take-up: €100 million<br />
• issue below par: 99.881%<br />
• issue at a discount: 4.25% coupon<br />
• period of 7 years<br />
• annual repayment of interest<br />
• security: rating at the moment of the issue.<br />
Bond issue 2009 (Retail bond)<br />
The net receipts from this retail bond loan will, in the first<br />
instance, be used for a partial refinancing of existing <strong>Aquafin</strong><br />
debt and for general company purposes. This includes<br />
financing the works that are in execution for the development<br />
of the supramunicipal treatment infrastructure in Flanders.<br />
The subscription for the bond loan that <strong>Aquafin</strong> issued has<br />
the following characteristics:<br />
n<br />
• take-up: €150 million<br />
• issue above par: 101.639%<br />
• issue at a discount: 4.00% coupon<br />
• annual gross return: 3,69%<br />
• repayment: 100% on date of expiry<br />
• period of 6 years<br />
• annual repayment of interest<br />
• listing: Euronext Brussels.<br />
Bank loan for the purchase of the office building at<br />
Dijkstraat 8 at 31 December <strong>2011</strong><br />
For the purchase and renovation of the office building at<br />
Dijkstraat 8, a long-term loan in the amount of €8,700,000 and<br />
a term of 20 years at fixed interest of 4.79% over the entire life<br />
of the loan was taken out.<br />
n<br />
Bank debts for commercial activities of the municipalities<br />
at 31 December <strong>2011</strong><br />
In the context of the commercial contracts with the<br />
municipalities, <strong>Aquafin</strong> is assuming responsibility for<br />
transport services for which a system of payment modalities<br />
can be elaborated at the municipalities' request.<br />
At the end of June 2009, the very first project (Kapellen)<br />
was completed and the transition was made from short-term<br />
financing to long-term financing over 15 years. Analogous to<br />
the loan that <strong>Aquafin</strong> took out with the bank, Kappellen<br />
receives from <strong>Aquafin</strong> an invoice every quarter with the<br />
charges for the transport service provided. In 2010, the second<br />
long-term project (Vilvoorde) was financed. In <strong>2011</strong>, there were<br />
also several projects that required new financing started.<br />
n Leasing debts at 31 December <strong>2011</strong><br />
This section contains the debts related to leased buildings:<br />
Dijkstraat 10 and Delta for a total amount still to be repaid<br />
of €2,122 k.<br />
n Short-term bank debts at 31 December <strong>2011</strong><br />
The short-term financing was used primarily to fund<br />
the work in progress before delivery. The two bond loans that<br />
<strong>Aquafin</strong> issued form the basis for the financing requirements<br />
for the work in progress and explain the low level.<br />
Commercial paper<br />
Features:<br />
• issue programme of €400 million in treasury bills<br />
• BNP Paribas Fortis is the arrangers and domicile agent<br />
• BNP Paribas Fortis, Dexia and KBC are the dealers<br />
• term of at least 7 days and a maximum of half a year<br />
• in <strong>2011</strong> no issues on the secondary market > 1 year<br />
• the very first issue by <strong>Aquafin</strong> took place on 22 June 2000.<br />
The commercial paper programme is hedged by €300<br />
million in back-up lines, distributed over the three dealers.<br />
At 31 December <strong>2011</strong>, €73 million in commercial paper<br />
was issued.<br />
Credit lines<br />
At 31 December <strong>2011</strong>, there were no take-ups carried out<br />
within the available bilateral credit lines (€80 million).<br />
The same applies to the revolving credit facility (€100 million).
n<br />
Short-term bank debts for commercial activities at<br />
31 December <strong>2011</strong><br />
In the context of the contracts with the municipalities<br />
that were entered into outside the scope of the agreement<br />
with the Flemish Region, <strong>Aquafin</strong> takes on specific sanitation<br />
tasks; at the request of the municipalities, a system of<br />
payment modalities can be worked out in respect of those<br />
tasks. <strong>Aquafin</strong> finances the work in progress by means of<br />
short-term financing. At 31/12/<strong>2011</strong>, €9,005 k was taken up<br />
within the existing credit lines.<br />
n<br />
Break-out of the <strong>financial</strong> long-term debts by how much<br />
time remains<br />
Debts due within<br />
Debts with<br />
a period of more than a remaining period Debts with<br />
1 year which expire of more than 1 and a remaining period<br />
At 31 December <strong>2011</strong> within the year less than 5 years of more than 5 years Total<br />
(in €000)<br />
Credit institutions 157,540 752,976 813,520 1,724,036<br />
Leasing debts 364 1,689 69 2,122<br />
TOTAL LONG-TERM FINANCIAL DEBTS 157,904 754,665 813,589 1,726,158<br />
Debts due within<br />
Debts with<br />
a period of more than a remaining period Debts with<br />
1 year which expire of more than 1 and a remaining period<br />
At 31 December 2010 within the year less than 5 years of more than 5 years Total<br />
(in €000)<br />
Credit institutions 140,107 699,526 515,760 1,355,393<br />
Leasing debts 326 1,720 402 2,448<br />
TOTAL LONG-TERM FINANCIAL DEBTS 140,433 701,246 516,162 1,357,841<br />
Debts due within<br />
Debts with<br />
a period of more than a remaining period Debts with<br />
1 year which expire of more than 1 and a remaining period<br />
At 1 January 2010 within the year less than 5 years of more than 5 years Total<br />
(in €000)<br />
Credit institutions 132,695 551,987 618,926 1,303,608<br />
Leasing debts 292 1,547 901 2,740<br />
TOTAL LONG-TERM FINANCIAL DEBTS 132,987 553,534 619,827 1,306,348<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
55
56<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
EXPLANATION 5.9 OTHER LONG-TERM FINANCIAL LIABILITIES<br />
n<br />
Hedge accounting - <strong>financial</strong> derivative instruments<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
Financial instruments to hedge the interest risk at market value 135,267 44,571 19,992<br />
Other liabilities 133 120 104<br />
TOTAL OTHER LONG-TERM FINANCIAL LIABILITIES 135,401 44,691 20,096<br />
n<br />
Interest policy<br />
Care must always be taken to ensure that:<br />
<strong>Aquafin</strong> has significant interest burdens. They are<br />
accompanied by interest risks due to possible changes in the<br />
interest rates, which is both a disadvantage if the interest rate<br />
increases and a missed benefit if the interest rate drops.<br />
<strong>Aquafin</strong> wants to optimise the cost of financing through<br />
the active management of the interest risk by using <strong>financial</strong><br />
instruments to have the cash flows be such that the risk<br />
is limited.<br />
In May 2006, the Board of Directors of <strong>Aquafin</strong> approved<br />
the implementation of a dynamic management procedure<br />
for interest rate risks. An interest policy was devised with<br />
the outlines of interest rate management set out; the policy<br />
was then approved by the board of directors.<br />
At 31 December <strong>2011</strong>, <strong>Aquafin</strong> had outstanding long-term<br />
debt of €1.7 billion. The active interest management system<br />
can be applied to a maximum of 35% of that debt, with the<br />
aim of achieving interest savings for <strong>Aquafin</strong>. The interest<br />
management may be built up as follows:<br />
• minimum of 65% of the debt with fixed-rate interest<br />
• maximum of 35% of the liquid debt, of which:<br />
- 25% with limited risk (cap)<br />
- 10% fully liquid<br />
<strong>Aquafin</strong> not only has an existing debt that can be actively<br />
managed, but the future budgeted debt can also be hedged.<br />
On the basis of the investment programmes imposed on<br />
<strong>Aquafin</strong> by the Flemish Region, <strong>Aquafin</strong> can look several years<br />
into the future and make a reasonable assessment of its<br />
future financing needs. To cover future financing needs,<br />
the interest rate policy results in a dynamic interestmanagement<br />
programme up to 50% of the future long-term<br />
debts, with a 5-year horizon.<br />
• the risks are covered<br />
• an underlying loan is always budgeted against a hedging<br />
structure<br />
For <strong>2011</strong>, interest savings of €2 million have been achieved<br />
through the active management of the interest risk.<br />
That <strong>financial</strong> result is the difference of the financing burden<br />
that <strong>Aquafin</strong> has as a result of the interest management<br />
and the financing burden that <strong>Aquafin</strong> would have had if it<br />
were subject to fixed interest without active management.<br />
This comparison is based on the so-called benchmark.<br />
The benchmark is the interest rate in effect, the fixed interest<br />
at which the underlying long-term loan would have been<br />
taken out at in accordance with the characteristics (term,<br />
repayment schedule) at the moment of finalising the <strong>financial</strong><br />
instruments. Different <strong>financial</strong> instruments combined<br />
constitute the structure. The interest cost of the underlying<br />
loan is then seen together with the cash flows from the<br />
matching structure, resulting in the ultimate financing<br />
burden for <strong>Aquafin</strong>.<br />
The savings are settled with the drinking-water companies.<br />
At least 50% of that was immediately deducted from the<br />
invoice to the drinking-water companies. For <strong>2011</strong>, €1.2 million<br />
has been credited. The remaining €0.8 million serves as a<br />
buffer for possible optimisations. At 31 December <strong>2011</strong>, a total<br />
of €2 million was set aside for optimisations. That amount<br />
was built up in <strong>2011</strong> and previous years.<br />
<strong>Aquafin</strong> established some new structures in <strong>2011</strong>, with<br />
an eye to the future financing needs. Existing strategies were<br />
also optimised. During <strong>2011</strong>, an additional €195 million in loans<br />
were hedged. That allows <strong>Aquafin</strong> to stay within the 35%<br />
to 50% range.
n<br />
Application of Hedge accounting<br />
The variation in the value of the <strong>financial</strong> instruments to<br />
cover the interest risk can be compensated through hedge<br />
accounting in the realised and unrealised results, if they<br />
satisfy specific conditions. In the other event, the impact is<br />
accounted for in the profit and loss account.<br />
A distinction is made between two hedge categories.<br />
1. Fair value hedge as a hedge of a change in the fair value<br />
of a <strong>financial</strong> asset or liability. <strong>Aquafin</strong> has <strong>financial</strong><br />
instruments based on existing loans with fixed interest<br />
rates that are classified as fair value hedges.<br />
2. Cash flow hedge as a hedge of the variability in cash flows<br />
that are either attributable to a particular risk of a<br />
recognised <strong>financial</strong> asset or liability or a very probable<br />
expected future transaction. <strong>Aquafin</strong> has <strong>financial</strong><br />
instruments on existing loans with variable interest rates<br />
that are classified as cash flow hedges as well as those on<br />
future loans with a high degree of probability with respect<br />
to predicted financing requirements.<br />
Within those two hedge categories, the structures can<br />
'qualify' for hedge accounting if they satisfy the condition<br />
that the underlying loan, in the event of an existing loan,<br />
is a perfect match with the structure or, in the event of a<br />
future loan, the budgeted loan will be taken up with certainty<br />
in accordance with the established structure. If one of the<br />
conditions is uncertain, <strong>Aquafin</strong> has opted not to qualify<br />
the structure.<br />
The following table shows a division of the structures by<br />
hedge category, qualification, outstanding amount (of the<br />
underlying loan or the future scheduled loan) and their<br />
market value. The market value of the structures is calculated<br />
as the discounted value of the estimated future cash flows<br />
and reflects the sales value at the moment of the applicable<br />
market interest rate (31/12/<strong>2011</strong> and 31/12/2010). The figures<br />
are shown in '000 EUR.<br />
The decline in the total market value of the <strong>financial</strong><br />
instruments is due to the declining interest rate. Setting up<br />
the structure is done at implementation at zero cost.<br />
The use of options such as fixed interest floors have a valuereducing<br />
effect in the event of declining interest rates.<br />
On the other hand, there is also the fact that the hedging<br />
portfolio is still being expanded due to the implementation<br />
of the interest policy.<br />
At 31 December <strong>2011</strong>, <strong>Aquafin</strong> had established dynamic<br />
interest management for 37 structures. Three of those do not<br />
qualify for hedge accounting. The impact is therefore shown<br />
completely in the results. Of the 34 qualifying structures,<br />
four are assigned as fair value hedges. Those structures<br />
were set up for an existing loan with a fixed interest rate<br />
and then made variable. A fair value adjustment is applied to<br />
the nominal value of the underlying loan of those structures.<br />
The remaining structures all qualify for cash flow hedging.<br />
Every hedging transaction is fully documented when it is<br />
entered into. That includes the identification of the underlying<br />
position, the objectives of the interest rate policy, the nature of<br />
the hedged position and of the <strong>financial</strong> instruments.<br />
Outstanding amount Market value Market value<br />
Hedge category Qualifying Number 31/12/<strong>2011</strong> 31/12/<strong>2011</strong> 31/12/2010<br />
(in €000)<br />
Fair value hedge No 2 113,333 308 507<br />
Fair value hedge Yes 4 134,167 1,740 -28<br />
Cash flow hedge No 1 100,000 -16,592 -7,651<br />
Cash flow hedge Yes 30 772,500 -120,724 -37,400<br />
TOTAL STRUCTURES 37 1,120,000 -135,267 -44,571<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
57
58<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Within IFRS, the valuation of <strong>financial</strong> instruments to cover<br />
the interest risk is categorised in three levels: 1) market prices,<br />
2) valuations derived from market prices (observable input)<br />
and 3) valuation models without observable input. <strong>Aquafin</strong>'s<br />
structures are categorised as level 2, as prescribed in IFRS.<br />
The market value of <strong>financial</strong> instruments consists of<br />
different components, such as the intrinsic value (value of the<br />
instrument as such), the time value (the value between time<br />
and expiry date) and coupons (interest still to be settled).<br />
The following table shows the market value of the<br />
structures with an indication of which structures run<br />
completely via the results account and which are partly shown<br />
in the realised and unrealised results. For the cash flow<br />
hedges, the intrinsic value goes via the realised and unrealised<br />
results but the time value goes to the results account.<br />
(in €000) <strong>2011</strong> 2010<br />
FINANCIAL INSTRUMENTS TO HEDGE THE INTEREST RISK AT MARKET VALUE,<br />
WITH THE VARIATION IN VALUE BEING PROCESSED VIA THE RESULTS ACCOUNT<br />
Fair value hedge - unqualified 308 507<br />
Fair value hedge - qualified 1,740 -27<br />
Cash flow hedge - unqualified -16,592 -7,651<br />
FINANCIAL INSTRUMENTS TO HEDGE THE INTEREST RISK AT MARKET VALUE,<br />
WITH THE VARIATION IN VALUE BEING PARTLY PROCESSED VIA THE REALISED<br />
AND UNREALISED RESULTS<br />
Cash flow hedge - qualified -120,724 -37,399<br />
TOTAL -135,267 -44,571<br />
The fair value hedges that do not qualify are shown<br />
completely in the results. That also applies for the cash flow<br />
hedge, which <strong>Aquafin</strong> has decided not to qualify. The fair value<br />
hedges that do qualify are settled in the results and, at the<br />
same time, the nominal value of their underlying loans are<br />
also adjusted.<br />
The following table shows the impact on the results<br />
account on the one hand and the part that is absorbed via<br />
the realised and unrealised results on the other hand.<br />
(in €000) <strong>2011</strong> 2010<br />
RESULTS ACCOUNT -10,985 -4,276<br />
Impact of all of the structures -12,516 -2,798<br />
Impact of the coupon -434 -1,515<br />
Adjustment of the hedge structure of the qualifying fair value hedges 1,964 36<br />
REALISED AND UNREALISED RESULTS -79,711 -20,302<br />
Impact of qualified cash flow hedges -79,711 -20,302<br />
VARIATION OF MARKET VALUE -90,695 -24,579
The impact on the results account of all of the structures<br />
over the period 1 January <strong>2011</strong> – 31 December <strong>2011</strong> amounts<br />
to -€12,515,674. For the qualifying fair value hedges, an<br />
adjustment to the nominal value of the underlying loans is<br />
made. In that way, there is a compensation in the results of the<br />
structure on the one hand and the underlying loan on the<br />
other hand. For <strong>2011</strong>, a decline in value of the underlying loan<br />
in the amount of €1,964,524 occurred to compensate for an<br />
increase in value of the structure in the same amount.<br />
That leads to an offset on the plus and the minus side of<br />
the result. In addition, there is the impact of the variation in<br />
the coupon.<br />
The impact on equity via the realised and unrealised<br />
results over the period 1 January <strong>2011</strong> – 31 December <strong>2011</strong><br />
is -€79,711,154.<br />
n<br />
Interest risk<br />
In general, we can state that a change in the interest rate<br />
has no impact on <strong>Aquafin</strong>'s results. The provisions of the<br />
management agreement with the Flemish Region that cover<br />
the compensation stipulate that all reasonable costs will be<br />
compensated. Interest payments, just like all other <strong>financial</strong><br />
costs, are reasonable costs.<br />
<strong>Aquafin</strong> has significant interest burdens and with the<br />
active management of the interest risk, the company wants to<br />
optimise the costs of financing. Under the active interest<br />
management, the risks are fully covered and there is always an<br />
underlying loan that matches the hedging structure.<br />
The interest risk for <strong>Aquafin</strong> is primarily with respect to<br />
financing requirements over the medium to long term.<br />
The interest policy stipulates that 50% of those budgeted<br />
financing requirements can be hedged five years in advance.<br />
n<br />
Sensitivity analysis<br />
A large part of <strong>Aquafin</strong>´s <strong>financial</strong> liabilities are fixedinterest<br />
long-term loans that interest rate fluctuations have<br />
no impact on. Since the implementation of the interest policy,<br />
that has changed and there are, on the one hand, several loans<br />
with fixed interest rates have been made variable and, on the<br />
other hand, several long-term loans have been taken out (or<br />
will be) with variable interest. For the swap transactions<br />
where variable interest rates are exchanged for fixed interest,<br />
the impact of an interest fluctuation is zero due to the<br />
complete neutralisation. In addition, there are several<br />
transactions with options (caps, floors) where a change in<br />
the interest rate – within a particular tunnel/collar – would<br />
have an impact on the interest payments.<br />
The following table illustrates the distribution of fixed<br />
versus variable interest as they applied when the loans were<br />
taken out (without taking a structure into account). Until <strong>2011</strong>,<br />
each loan with variable interest was fully hedged with a<br />
structure (cap). A loan with variable interest and no hedge is<br />
permitted under the new interest policy (10% rule).<br />
(in €000) <strong>2011</strong> 2010<br />
DISTRIBUTION OF FIXED/VARIABLE INTEREST RATES EXPRESSED IN NOMINAL VALUE<br />
Fixed interest rate 1,456,536 1,207,060<br />
Variable interest rate 267,500 148,333<br />
TOTAL 1,724,036 1,355,393<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
59
60<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
A sensitivity analysis uses forward rates to estimate the<br />
impact of a shift in the interest. Forward rates are the<br />
estimated future interest rates in the assumption that all<br />
other variables in the market will be kept constant. On that<br />
basis, the impact of an interest decline or increase is<br />
translated into an interest cost or interest receipts. The table<br />
below illustrates the impact.<br />
Net result<br />
(in €000) impact at 31/12/12<br />
Impact at 31/12/2012 -0,50% -717<br />
Impact at 31/12/2012 -0,25% 322<br />
Impact at 31/12/2012 0,00% 1,192<br />
Impact at 31/12/2012 0,25% 1,660<br />
Impact at 31/12/2012 0,50% 1,149<br />
Impact at 31/12/2012 1,00% 3,200<br />
The interest burdens are calculated on the basis of the<br />
forward rates as set at 30 December <strong>2011</strong>. The interest burdens<br />
at 31 December 2012, for example, are estimated on the basis<br />
of the estimated long-term interest in accordance with the<br />
underlying loans. On the basis of those forward rates – with all<br />
of the variables kept constant – the net effect at 31 December<br />
2012 is plus €1,192 thousand. The theoretical approach<br />
whereby a shift of the interest is simulated ranges from<br />
-50bp to +100bp. An interest rate increase and small interest<br />
rate decrease results in a positive impact and an interest rate<br />
decrease of 50 bp results in a negative impact.<br />
The assumed movement as expressed in basic points for<br />
the sensitivity analysis of the interest is based on market<br />
conditions that are clearly more volatile than they have been<br />
in recent years. An increase in the interest rate results in more<br />
savings in comparison with interest rate declines.<br />
n<br />
Liquidity risk<br />
Sources of long-term financing are diversified via the issue<br />
of private and public bond issue. In addition, there is a also<br />
a commercial paper programme, a revolving credit facility<br />
and there are credit and back-up lines at various banks.<br />
n<br />
Financial risks<br />
<strong>Aquafin</strong> has loans and must be able to repay them.<br />
The short-term loans are used primarily to fund the work in<br />
progress before delivery. Long-term financing is based on the<br />
allocation agreement. It defines that the balance of the longterm<br />
credits must be smaller than the claims that <strong>Aquafin</strong> has<br />
on the drinking water companies, respectively the Flemish<br />
Region. These claims consist of the investment projects that<br />
have not been paid, but that have already been delivered.<br />
The covenants with the credit institutions have been<br />
satisfied.<br />
A breakdown of the <strong>financial</strong> instruments by year of<br />
settlement is shown below.<br />
Expiry year Expiry year Expiry year<br />
(in €000) 2012 2013-2016 ≥ 2017 Total<br />
DISTRIBUTION BY SETTLEMENT YEAR (AT NOMINAL VALUE)<br />
Outstanding debt 24,333 219,833 875,833 1,120,000<br />
EXPLANATION 5.10 OTHER PROVISIONS AT 31 DECEMBER <strong>2011</strong><br />
The provisions provided at 31 December <strong>2011</strong> relate to<br />
legal disputes, insurance dossiers, disputes in the context of<br />
the execution of the management agreement and processing<br />
of the sludge buffered in the plants.<br />
From <strong>financial</strong> year <strong>2011</strong>, the (net) provisions to be created<br />
are broken down into gross liabilities and receipts from<br />
third parties. The retroactive split of the net provisions at<br />
31 December 2010 and on the situation of the opening balance<br />
would have been too expensive, which would not have been<br />
proportional to the improved quality of the information.<br />
(in €000) 31/12/<strong>2011</strong> 31/12/2010 01/01/2010<br />
Gross liabilities 7,064 2,139 2,173<br />
Intervention of third parties -5,321 - -<br />
Net provisions 1,743 2,139 2,173
Evolution of the provisions by type:<br />
Disputes<br />
Legal Insurance Management Sludge<br />
(in €000) Arrears disputes dossiers Agreement buffers Total<br />
PROVISIONS AT 31/12/2010 16 1,597 152 122 252 2,139<br />
Additions 27 4,997 912 40 61 6,037<br />
Clawbacks of unused amounts -20 -897 -45 -150 -1,112<br />
Draws 0<br />
PROVISIONS AT 12/31/11 23 5,697 1,019 162 163 7,064<br />
Short-term at 31/12/<strong>2011</strong> 9 163 172<br />
Long-term at 31/12/<strong>2011</strong> 14 5,697 1,019 162 6,892<br />
Disputes<br />
Legal Insurance Management Sludge<br />
(in €000) Arrears disputes dossiers Agreement buffers Total<br />
PROVISIONS AT 1/1/10 32 1,428 107 122 484 2,173<br />
Additions 432 45 164 641<br />
Clawbacks of unused amounts -16 -141 -396 -553<br />
Draws -122 -122<br />
PROVISIONS AT 31/12/2010 16 1,597 152 122 252 2,139<br />
Short-term at 12/31/10 3 252 255<br />
Long-term at 12/31/10 13 1,597 152 122 1,884<br />
The provisions for processing the sludge that is buffered in<br />
the plants can be charged to the drinking water<br />
companies/the Flemish Region immediately because they fall<br />
under 'reasonable costs' as provided for in the management<br />
agreement with the Flemish Region.<br />
The other posts with respect to provisions cannot be<br />
charged to the drinking water companies/the Flemish Region<br />
– or only over the long term – and accompanied by clear<br />
<strong>statement</strong> of why those costs should be considered<br />
reasonable.<br />
n<br />
Provisions for lateness<br />
For delays in the delivery of investment projects, in<br />
comparison with the agreed delivery dates, the group legally<br />
owes compensation for damages. Provisions were made to<br />
cover any such delays that could have been foreseen at<br />
31 December <strong>2011</strong>. The provision for lateness amounts to<br />
€22,745 for five projects.<br />
n<br />
Provisions for insurance dossiers<br />
At 31 December <strong>2011</strong>, the provision amounted to<br />
€1,018,508 for four insurance dossiers.<br />
n<br />
Provisions for various disputes in the context of the<br />
management agreement<br />
All of the remaining risks related to the management<br />
agreement fall under this provision, especially with respect<br />
to the possible infringements of the management agreement<br />
or the risk of unreasonableness and thus no repayment of<br />
specific costs.<br />
n<br />
Provision for sludge buffers<br />
Every year, a provision is made for the processing costs for<br />
the sludge in the buffers. The processing cost for the buffered<br />
sludge falls under 'reasonable costs' as provided for in the<br />
management agreement with the Flemish Region.<br />
n<br />
Provisions for legal disputes<br />
With respect to legal disputes, a provision was made in the<br />
amount of a reasonable estimate of the penalty in the event<br />
that it was considered likely that the group would lose the<br />
dispute. At 31 December <strong>2011</strong>, the provision for legal disputes<br />
amounted to €5,697,771 for 138 disputes.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
61
62<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
EXPLANATION 5.11 PENSION LIABILITIES<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
PENSION LIABILITIES<br />
Provision for defined benefit plans 5,926 5,894 5,773<br />
Provision for early-retirement pensions 901 1,013 815<br />
TOTAL 6,827 6,907 6,589<br />
A distinction is made in the pension liabilities between:<br />
1. Provisions for defined benefit plans<br />
2. Provisions for early-retirement pensions<br />
1. Provisions for defined benefit plans<br />
There are two types of pension schemes within the group:<br />
defined benefit plans and defined contribution plans.<br />
• Liabilities with respect to defined contribution plans are<br />
applied against the profit and loss account immediately.<br />
The periodic premium payment is registered as a period<br />
cost.<br />
• The debt or possible receivable from the defined benefit<br />
plans is shown in the balance <strong>statement</strong>. In such<br />
schemes, the amount in the balance <strong>statement</strong> (the net<br />
liability) matches the cash value of the gross liability,<br />
reduced by the fair value of the fund investments<br />
and adjusted for not-taken pension costs for past<br />
employment. To be able to estimate future liabilities<br />
accurately, a specific actuarial calculation, the projected<br />
unit credit method, will be used.<br />
The provision resulting from that calculation amounted to<br />
€5,773 k on 1 January 2010; €5,894 k on 31 December 2010 and<br />
€5,926 k on 31 December <strong>2011</strong>.<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
PROVISION FOR DEFINED BENEFIT PLANS<br />
Current value of the liability 21,818 19,998 17,961<br />
Fair value of the plan assets 15,892 14,103 12,188<br />
DEFINED BENEFIT PLANS 5,926 5,894 5,773<br />
The actuarial calculation takes the following assumptions<br />
into account:<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
ASSUMPTIONS<br />
Salary increase 3.5% per year until age 55 3.5% per year until age 55 3.5% per year until age 55<br />
2% per year thereafter 2% per year thereafter 2% per year thereafter<br />
reported % include inflation reported % include inflation reported % include inflation<br />
Inflation 2% per year 2% per year 2% per year<br />
This % applied to calculate This % applied to calculate This % applied to calculate<br />
the ceiling of the social security the ceiling of the social security the ceiling of the social security<br />
Discount rate 5.15% per year 5.15% per year 5.15% per year<br />
Retirement age 65 years for everyone 65 years for everyone 65 years for everyone<br />
Life expectancy MR (Belgian mortality tables men) MR (Belgian mortality tables men) MR (Belgian mortality tables men)<br />
FR (Belgian mortality tables women) FR (Belgian mortality tables women) FR (Belgian mortality tables women)
The changes in the cash value of the defined benefit plans<br />
are as follows:<br />
The changes in the fair value of the fund investments are<br />
as follows:<br />
(in €000)<br />
DEFINED BENEFIT OBLIGATION 01/01/2010 17,961<br />
Service cost 1,228<br />
Interest cost 917<br />
Plan Participants' Contributions 251<br />
Premiums paid<br />
Expenses paid<br />
Benefits paid -337<br />
Actuarial gains/losses -23<br />
DEFINED BENEFIT OBLIGATION 31/12/2010 19,998<br />
Service cost 1,272<br />
Interest cost 1,025<br />
Plan Participants' Contributions 262<br />
Premiums paid<br />
Expenses paid<br />
Benefits paid -525<br />
Actuarial gains/losses -213<br />
DEFINED BENEFIT OBLIGATION 31/12/<strong>2011</strong> 21,818<br />
(in €000)<br />
FAIR VALUE OF PLAN ASSETS 01/01/2010 12,188<br />
Expected return on plan assets 574<br />
Expected employer contribution 1,182<br />
Plan Participants' Contributions 251<br />
Premiums paid<br />
Expenses paid<br />
Benefits paid -337<br />
Actuarial gains/losses 245<br />
FAIR VALUE OF PLAN ASSETS 31/12/2010 14,103<br />
Expected return on plan assets 665<br />
Expected employer contribution 1,282<br />
Plan Participants' Contributions 262<br />
Premiums paid<br />
Expenses paid<br />
Benefits paid -525<br />
Actuarial gains/losses 105<br />
FAIR VALUE OF PLAN ASSETS 31/12/<strong>2011</strong> 15,892<br />
The cost shown in the results account with respect to<br />
the defined benefit plans comprises the following elements.<br />
(in €000) <strong>2011</strong> 2010<br />
CHANGES IN DEFINED BENEFIT OBLIGATION (1) 2,034 2,059<br />
Service cost 1,272 1,228<br />
Interest cost 1,025 917<br />
Plan Participants' contributions 262 251<br />
Benefits paid -525 -337<br />
CHANGE IN PLAN ASSETS (2) 1,684 1,670<br />
Return on plan assets 665 574<br />
Employer contribution 1,282 1,182<br />
Plan Participant's contributions 262 251<br />
Benefits paid -525 -337<br />
BENEFIT EXPENSE (1-2) 350 389<br />
The fair value of the fund investments at 31 December 2010<br />
and at 31 December <strong>2011</strong> consists for 100% of branch 21 products<br />
with guaranteed returns.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
63
64<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Sensitivity analysis<br />
DR 5.15% 6.15% 4.15%<br />
+ 1.00% - 1.00%<br />
(in €000) Baseline Discount Rate Discount Rate<br />
SENSITIVITY ANALYSIS<br />
Gross Service Cost at 1/1/2012 (no interest) 1,481 1,238 1,785<br />
Benefit Expense for 2012 1,666 1,436 1,921<br />
Defined Benefit Obligation (DBO) as of 1/1/2012 21,818 18,483 25,942<br />
With respect to pension plans of the defined contribution<br />
plan, €468 k in premiums in <strong>2011</strong> were shown in the results.<br />
2. Provisions for early-retirement pensions<br />
Early retirement schemes are also treated as defined benefit<br />
plans.<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
EARLY RETIREMENT LIABILITIES<br />
Defined benefit obligation 901 1,013 815<br />
Assets 0 0 0<br />
UNFUNDED DEFINED BENEFIT OBLIGATION 901 1,013 815<br />
The group makes a provision that is calculated in accordance<br />
with the project unit credit method. The early-retirement<br />
pension liability amounted to €815 k at 1 January 2010,<br />
€1,013 k at 1 January <strong>2011</strong> and €901 k at 1 January 2012.<br />
The following assumptions were used in the calculation:<br />
(in €000) <strong>2011</strong> 2010 At 1 January 2010<br />
ASSUMPTIONS<br />
Salary increase 3.5% per year until age 55 3.5% per year until age 55 3.5% per year until age 55<br />
2% per year thereafter 2% per year thereafter 2% per year thereafter<br />
reported % include inflation reported % include inflation reported % include inflation<br />
Inflation 2% per year 2% per year 2% per year<br />
This % applied to calculate This % applied to calculate This % applied to calculate<br />
the ceiling of the social security the ceiling of the social security the ceiling of the social security<br />
Discount rate 5.15% per year 5.15% per year 5.15% per year<br />
Early retirement age Until 31/12/2014: 1st day of 1st day of the month after 1st day of the month after<br />
the month after the 58th birthday the 58th birthday the 58th birthday<br />
From 1/1/15: 1st day of the month<br />
after the 60th birthday<br />
Probability of taking Age < 50 years: 0% Age < 50 years: 0% Age < 50 years: 0%<br />
early retirement Age ≥ 50 years: 20% Age ≥ 50 years: 20% Age ≥ 50 years: 20%<br />
Life expectancy MR (Belgian mortality tables men) MR (Belgian mortality tables men) MR (Belgian mortality tables men)<br />
FR (Belgian mortality tables women) FR (Belgian mortality tables women) FR (Belgian mortality tables women)
The early-retirement pension liability amounted to €815 k<br />
at 1 January 2010, €1,013 k at 1 January <strong>2011</strong> and €901 k at<br />
1 January 2012. There were no assets to offset that.<br />
Changes to the cash value of the defined benefit liability<br />
for early-retirement pension:<br />
(in €000)<br />
DEFINED BENEFIT OBLIGATION<br />
Service cost 66<br />
Interest cost 41<br />
Benefits paid -6<br />
Actuarial gains/losses 96<br />
DEFINED BENEFIT OBLIGATION 31/12/2010 1,013<br />
Service cost 93<br />
Interest cost 51<br />
Benefits paid -11<br />
Actuarial gains/losses -246<br />
DEFINED BENEFIT OBLIGATION 31/12/<strong>2011</strong> 901<br />
Sensibility analysis<br />
DR 5.15% 6.15% 4.15%<br />
+ 1.00% - 1.00%<br />
(in €000) Baseline Discount Rate Discount Rate<br />
SENSITIVITY ANALYSIS<br />
Gross Service Cost at 1/1/2012 (no interest) 1,480,865 1,238,068 1,785,079<br />
Benefit Expense for 2012 1,666,083 1,436,252 1,921,064<br />
Defined Benefit Obligation (DBO) as of 1/1/2012 21,818,492 18,483,599 25,942,224<br />
EXPLANATION 5.12 TO THE BALANCE ITEM 'COMMERCIAL DEBTS AND OTHER PAYABLES'<br />
The commercial debts and other payables amounted to<br />
€83,115 k at 31 December <strong>2011</strong>. With respect to the balance at<br />
31 December 2010, that represented an increase of €3,668 k.<br />
(in €000) Explanation <strong>2011</strong> 2010 At 1 January 2010<br />
Commercial debts and other payables 5.12 83,115 79,447 69,559<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
65
66<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
A distinction is made within the commercial debts and<br />
other payables between: suppliers, debts with respect to<br />
payroll and social premiums, advances received and pledges<br />
received. At 31 December <strong>2011</strong>, the number of days of supplier<br />
credit - calculated as: outstanding commercial debts of no<br />
more than one year/purchases including VAT * 365 - 55 days.<br />
In 2010, that was 61 days. The purchases consist of: the<br />
investments in projects during the <strong>financial</strong> year, the change<br />
to the fixed assets under construction, the purchase of trading<br />
goods, raw materials and additives, and the services and<br />
miscellaneous goods.<br />
(in €000) 31/12/<strong>2011</strong> 31/12/2010 01/01/2010<br />
Suppliers 75,695 72,113 62,656<br />
Debts related to salaries and social premiums 7,250 7,211 6,568<br />
Advances received 155 110 290<br />
Securities received 15 14 44<br />
TOTAL 83,115 79,447 69,559<br />
EXPLANATION 5.13 TO THE 'OTHER SHORT-TERM FINANCIAL LIABILITIES' POST<br />
The other <strong>financial</strong> liquid assets amounted to €15,086 k at<br />
31 December <strong>2011</strong>. With respect to the balance at 31 December<br />
2010, that represented an increase of €2,030 k.<br />
(in €000) Explanation <strong>2011</strong> 2010 At 1 January 2010<br />
Other short-term <strong>financial</strong> liabilities 5.13 15,086 13,056 13,768<br />
This concerns a deferred account of the liabilities, primarily<br />
interest owed.<br />
EXPLANATION 5.14 TO THE 'TAXES PAYABLE' ITEM<br />
The outstanding liability at 31 December <strong>2011</strong> primarily<br />
concerned income taxes due (€1,213 k) and property taxes<br />
(€436 k).<br />
(in €000) Explanation <strong>2011</strong> 2010 At 1 January 2010<br />
Taxes payable 5.14 1,770 1,701 121
Explanation to the consolidated profit and loss account<br />
EXPLANATION 6.0 SERVICES RENDERED<br />
(in €000) <strong>2011</strong> 2010<br />
Activities under the Management Agreement -232,989 -214,215<br />
Activities outside the Management Agreement -64,456 -33,741<br />
TOTAL -297,445 -247,956<br />
Of that amount, €232,989 k relates to activities under the<br />
management agreement, compared with €214,215 k in 2010.<br />
For the activities outside the scope of the management<br />
agreement, revenues of €64,456 k were achieved, versus<br />
€33,741 k in 2010.<br />
In the context of the management agreement, <strong>Aquafin</strong><br />
collects the wastewater from the Flemish households in main<br />
sewers and transports it to treatment plants. For that purpose,<br />
<strong>Aquafin</strong> first developed the necessary infrastructure:<br />
collectors for wastewater, pumping stations and wastewater<br />
treatment plants. <strong>Aquafin</strong> prefinances the projects awarded<br />
and the drinking water companies repay the investments.<br />
From projects delivered from 1 January 2009, the repayment<br />
term is 15 years for the electromechanical works and 30 years<br />
for the construction works.<br />
For assets that were acquired from the Vlaamse Milieu -<br />
maatschappij (Flemish Environmental Agency), the repayment<br />
term is 20 years.<br />
<strong>Aquafin</strong> is also responsible for the maintenance and<br />
operation of the supramunicipal sewerage and the<br />
wastewater treatment plants. The treated wastewater must<br />
comply with Flemish and European standards.<br />
Outside the management agreement, <strong>Aquafin</strong> has also<br />
developed a specific offering for cities and municipalities.<br />
Several cities and municipalities have outsourced the<br />
construction and maintenance of their sewers completely to<br />
<strong>Aquafin</strong>. Several companies also have their wastewater<br />
treated by <strong>Aquafin</strong>.<br />
EXPLANATION 6.1 OTHER INCOME<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Other company income 6.1 15,804 6,803<br />
The other income amounted to €15,804 k in <strong>2011</strong> and<br />
€6,803 k in 2010.<br />
This primarily concerns recovery of costs that cannot be<br />
assigned to normal income.<br />
The increase in this items relates primarily to the changes<br />
in market value vis-à-vis the fair value hedge (qualified and<br />
unqualified) and unqualified cash flow hedges. Based on the<br />
concession agreement with the Flemish Region, this change<br />
in market value is compensated for in the IFRIC 12 claim.<br />
Changes in market value of qualified cash flow hedges do not<br />
go via the other income item, but via the overview of the<br />
unrealised results (in plus and minus).<br />
Other items here are: invoicing to third parties of the costs<br />
of incidents, invoicing of public utilities if third parties use<br />
the public utilities of the group, invoicing of costs incurred for<br />
treating wastewater originating outside the working area of<br />
the group (e.g. wastewater from northern France), invoicing of<br />
extra sludge costs if the usual sludge-processing company is<br />
unable to process the agreement volumes, income from green<br />
electricity certificates, recoveries related to the company<br />
vehicles and special assignments.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
67
68<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
EXPLANATION 6.2 RAW MATERIALS AND ADDITIVES, SERVICES AND MISCELLANEOUS GOODS<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Raw materials and additives, services and miscellaneous goods 6.2 -163,426 -125,755<br />
The costs for raw materials and additives amounted to<br />
€163,426 k in <strong>2011</strong> and €125,755 k in 2010. The primary cost<br />
components include: consumption of natural gas and<br />
electricity, removal and dumping costs for sand and sludge,<br />
maintenance costs, consumption of chemicals, vacuuming,<br />
spraying and cleaning and operating costs charged by the<br />
Brussels Region for treating wastewater originating from<br />
the Flemish Region, study bureau costs, external personnel<br />
and vehicle costs, costs for study bureau and construction in<br />
the context of commercial activities.<br />
The increase in the costs of this item are primarily due to<br />
the growth of the commercial activities.<br />
In this item, €525 k and €531 k in research costs were posted<br />
immediately against the results in 2010 and <strong>2011</strong>, respectively.<br />
The immediately usable research that <strong>Aquafin</strong> conducts<br />
concentrates on cost-control, guaranteeing the effluent<br />
standards and introducing the best available technologies.<br />
The strategic research is grouped around the theme areas of<br />
climate change, integrated water management and asset<br />
management of the (sewer) infrastructure.<br />
EXPLANATION 6.3 PERSONNEL COSTS<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Personnel costs 6.3 -59,187 -55,982<br />
(in €000) <strong>2011</strong> 2010<br />
DETAIL OF PERSONNEL COSTS<br />
Salaries and direct social benefits 42,552 39,840<br />
Employer contributions for social insurances 11,597 11,339<br />
Employer's premiums for extra-legal insurances 2,711 2,446<br />
Other personnel costs 2,216 2,271<br />
Pensions 110 86<br />
TOTAL 59,187 55,982<br />
The personnel costs amounted to €59,187 k in <strong>2011</strong> and<br />
€55,982 k in 2010. The personnel costs include: remuneration<br />
and direct social benefits, employer contributions for social<br />
insurances, employer premiums for extra-legal insurances,<br />
other personnel costs and early-retirement payments.<br />
During <strong>financial</strong> year <strong>2011</strong>, an average of 845.8 FTEs were<br />
employed; 715.4 were full-time and 172.2 were part-time.<br />
A total of 1,384,725 hours were worked.<br />
During <strong>financial</strong> year 2010, an average of 827.3 FTEs were<br />
employed; 698.5 were full-time and 169.8 were part-time.<br />
A total of 1,374,124 hours were worked.<br />
On closing date of the <strong>financial</strong> year <strong>2011</strong>, the group had<br />
725 full-time employees and 167 part-time employees for a<br />
total of 851.8 FTEs; at 31 December 2010, the group had<br />
704 full-time employees and 178 part-time employees, for a<br />
total of 837.9 FTEs. All of the members of personnel have<br />
a white-collar contract.
EXPLANATION 6.4 WRITE-OFFS, AMORTISATIONS AND SPECIAL DEVALUATIONS<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Write-offs, amortisations and special devaluations 6.4 -344 -212<br />
Inasmuch as the group does not recognise any tangible<br />
fixed assets on the balance <strong>statement</strong>, that item applies<br />
solely to amortisations and devaluations. More specifically,<br />
it concerns changes to provisions, defined pension schemes<br />
and early-retirement pensions and changes in devaluations<br />
and losses on receivables.<br />
EXPLANATION 6.5 OTHER CHARGES<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Other charges 6.5 -4,074 -3,394<br />
The other charges amounted to €4,074 k in <strong>2011</strong> and<br />
€3,394 k in 2010. They related primarily to business taxes:<br />
non-deductible VAT, property tax, regional taxes and other<br />
fiscal costs. Primarily the property tax was higher in<br />
comparison with 2010.<br />
EXPLANATION 6.6 COSTS OF FINANCING<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Costs of financing 6.6 -79,323 -62,302<br />
(in €000) <strong>2011</strong> 2010<br />
Interest on credits and other financing costs 66,632 59,307<br />
Financing costs related to <strong>financial</strong> lease agreements 175 197<br />
Changes to market value of hedge structures to P&L 12,516 2,798<br />
TOTAL FINANCING COSTS 79,323 62,302<br />
The financing burdens relate primarily to the costs for<br />
interest-bearing loans, long and short term, and changes in<br />
the market value of the hedging structures (see, also,<br />
explanations 5.8 and 5.13).<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
69
70<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
EXPLANATION 6.7 FINANCING INCOME<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Financing income 6.7 2,237 846<br />
The financing income amounted to €2,237 k in <strong>2011</strong> and<br />
€846 k in 2010.<br />
This primarily concerns the income from interest<br />
management, interest from investments and arrears interest<br />
received. A strong increase was shown in the income from<br />
interest management.<br />
EXPLANATION 6.8 INCOME TAX<br />
Current tax receivables and liabilities for the current and<br />
previous periods are valued at the amount that is expected<br />
to be received from or paid to the tax authorities in Belgium<br />
or elsewhere.<br />
In view of the specific provisions of the management<br />
agreement, the group does not have any temporary<br />
differences in assets or liabilities that could give cause to<br />
establish a deferred tax debt or receivable.<br />
Article 43.1 of the same management agreement states<br />
that all of the reasonable costs incurred by <strong>Aquafin</strong> are to<br />
be paid by the Flemish Region – via the drinking water<br />
companies – including all levies and taxes owed by <strong>Aquafin</strong><br />
for the implementation of this agreement.<br />
(in €000) <strong>2011</strong> 2010<br />
CONSOLIDATED PROFIT AND LOSS ACCOUNT<br />
Current taxes 1,980 1,150<br />
Changes to taxes from previous years -240<br />
Taxes on profit as per consolidated profit and loss <strong>statement</strong> 1,980 910<br />
Relationship between actual tax burden and theoretical tax burden:<br />
Profit before taxes from ongoing business activities 9,132 7,960<br />
Unrealised results 0 0<br />
Projects in progress on behalf of third parties: % of completion 1,552 -369<br />
Charge-through of taxes in the context of the concession agreement 876 397<br />
PROFIT BEFORE TAXES 11,560 7,987<br />
At the legal rate applicable in Belgium (34%) 3,929 2,715<br />
Adjustments to taxes on profit from previous years -240<br />
Non-deductible costs 673 586<br />
Deduction for risk capital -2,512 -2,151<br />
Investment deduction -110<br />
At the effective applicable rate 1,980 910<br />
TAXES ON PROFIT AS PER CONSOLIDATED PROFIT AND LOSS STATEMENT 1,980 910
The conversion to IFRS has a temporarily impact on the<br />
results of the projects on behalf of third parties (commercial<br />
projects in progress). Up until 2010, those ‘commercial’<br />
projects were still being processed under BE GAAP in<br />
accordance with the completed contract method. As from<br />
<strong>2011</strong>, the percentage of completion method is also applied<br />
under BE GAAP. As the corporation tax is calculated based on<br />
accounting in accordance with BE GAAP, there is also<br />
temporary difference in tax base.<br />
As from fiscal year 2012, there will be no longer difference<br />
in results of these projects under BE GAAP and IFRS.<br />
In the context of the concession agreement with the<br />
Flemish Region, €876 k and €397 k, respectively, was charged<br />
to the drinking water companies/the Flemish Region in <strong>2011</strong><br />
and 2010.<br />
(in €000)<br />
'COMMERCIAL’ RESULT BE GAAP<br />
Opening balance sheet<br />
2010<br />
<strong>2011</strong> 1,552<br />
TOTAL 1,552<br />
'COMMERCIAL' RESULT IFRS<br />
Opening balance sheet 1,183<br />
2010 369<br />
<strong>2011</strong><br />
TOTAL 1,552<br />
EXPLANATION 6.9 RESULT PER SHARE<br />
(in €000) Explanation <strong>2011</strong> 2010<br />
Profit before taxes from ongoing business activities 9,132 7,960<br />
NET PROFIT 8,028 7,447<br />
To be allocated to:<br />
Owners of equity instruments of the parent company 8,028 7,447<br />
RESULT PER SHARE (€)<br />
Ordinary profit per share, to be allocated to holders of ordinary shares<br />
of the parent company 6.9 9.91 9.31<br />
Diluted profit per share, to be allocated to holders of ordinary shares<br />
of the parent company 6.9 9.91 9.31<br />
PROFIT PER SHARE FROM ONGOING BUSINESS ACTIVITIES (€)<br />
Ordinary profit per share from ongoing business activities, to be allocated<br />
to holders of ordinary shares of the parent company 6.9 9.91 9.31<br />
Diluted profit per share from ongoing business activities, to be allocated<br />
to holders of ordinary shares of the parent company 6.9 9.91 9.31<br />
All of the shares of the group are in the hands of the Vlaamse<br />
Milieuholding (Flemish Environmental Holding Company).<br />
On 2 December 2010, the Vlaamse Milieuholding executed<br />
a full contribution to capital. As a result, the fully-paid up capital<br />
of the group consisted of 800,000 shares at the end of 2010.<br />
On 13 December <strong>2011</strong>, in the context of the aforementioned<br />
acquisition of assets from the Flemish Environmental Agency,<br />
the capital of the group was increased by €50 million,<br />
represented by 201,613 shares. Of that amount, €12.5 million<br />
was deposited.<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
71
72<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Calculated on a daily basis, the weighted average of<br />
the number of shares over <strong>2011</strong> amounted to: 810,495 shares.<br />
After all:<br />
• 800,000 shares x 346 days = 276,800,000<br />
• 1,001,613 shares x 19 days = 19,030,647<br />
• Total: 295,830,647<br />
295,830,647 : 365 days = 810,494 shares (weighted<br />
average)<br />
n<br />
Dividend per share<br />
On 3 May <strong>2011</strong>, a total dividend of €6,723,734 was paid out<br />
over <strong>financial</strong> year 2010, equivalent to:<br />
• €10.93 for shares fully paid in on 25 April 1990<br />
• €8.40 for shares that have not been fully paid in during<br />
the <strong>financial</strong> year.<br />
If the General Meeting of 17 April 2012 approves the<br />
proposed allocation of profits for <strong>2011</strong>, then the following<br />
gross dividend will be paid out on 23 April 2012:<br />
• €10.09 for shares that have been fully paid in<br />
• €0.12 for shares that have not been fully paid in.<br />
Explanation to the consolidate cash flow overview<br />
EXPLANATION 7.1 EXPLANATION TO THE CONSOLIDATE CASH FLOW OVERVIEW -<br />
RECEIVABLES FROM CLIENTS<br />
(in €000) <strong>2011</strong> 2010<br />
Clients Management Agreement 355,883 332,224<br />
Of which: Construction activity 125,366 110,178<br />
Services 230,517 222,047<br />
Clients commercial 51,778 32,768<br />
TOTAL 407,661 364,992<br />
As per Article 43 of the management agreement, <strong>Aquafin</strong><br />
is entitled to compensation from the Flemish Region to cover<br />
all reasonable costs and, with due regard for the risks taken,<br />
ensuring the minimum acceptable return for the shareholders.<br />
Within that compensation, a distinction can be made between<br />
compensations relating to the construction activities and<br />
compensation with respect to services.<br />
The compensations for construction activities concern the<br />
payment for the wastewater treatment infrastructure.<br />
The repayment period for that infrastructure takes the<br />
expected life of the infrastructure into account. In <strong>2011</strong>,<br />
that compensation increased in comparison with 2010 as a<br />
result of the expansion of the patrimony.<br />
The compensation with respect to the services primarily<br />
concerns the invoicing of the operating expenses from the<br />
head office and operations and the interest burdens, increased<br />
by a compensation for equity. The expansion of the patrimony<br />
has an impact on the operating costs and the interest burdens.<br />
As a result, we also see an increase in the receivables from<br />
services in the context of the management agreement.<br />
Due to the growth in the commercial activities, the client<br />
receipts are also increasing in that segment.
Segment reporting<br />
For management purposes, the group is organised in two<br />
operational segments.<br />
On the one hand, company activities are being carried out<br />
in the context of the concession agreement (management<br />
agreement) with the Flemish Region (the supramunicipal<br />
sanitation). On the other hand, commercial activities are<br />
carried out primarily on behalf of Flemish cities and<br />
municipalities (the municipal sanitation). In the second<br />
segment, the group is in direct competition with other<br />
sewerage managers. Via the subsidiary Aquaplus NV, the group<br />
also serves industry in Flanders and carries out consultancy<br />
assignment abroad on a limited scale.<br />
In figures:<br />
Concession agreement Commercial Total<br />
Cities &<br />
(in €000) Flemish Region Municip Other<br />
AT 31/12/<strong>2011</strong><br />
Services rendered 232,989 63,883 573 297,445<br />
Profit before taxes from ongoing business activities 7,283 1,847 2 9,132<br />
Assets 2,271,411 23,709 948 2,296,068<br />
Liabilities 2,041,532 15,641 254 2,057,427<br />
AT 31/12/2010<br />
Services rendered 214,215 33,471 270 247,956<br />
Profit before taxes from ongoing business activities 6,079 1,879 2 7,960<br />
Assets 1,859,221 11,152 847 1,871,220<br />
Liabilities 1,639,139 7,089 155 1,646,383<br />
AT 01/01/2010<br />
Assets 1,615,342 10,695 733 1,626,770<br />
Liabilities 1,442,025 7,085 43 1,449,153<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
73
74<br />
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong> <strong>2011</strong><br />
Related Party Disclosures<br />
In <strong>2011</strong>, the following compensations were paid to managers<br />
in key positions:<br />
n<br />
Executive Director<br />
The total gross compensation that was invoiced over <strong>2011</strong><br />
by Bamboss BVBA, whose Managing Director is the Executive<br />
(Managing) Director of <strong>Aquafin</strong>, is composed as follows:<br />
• basic compensation: € 384,415.30<br />
• variable portion: € 139,620<br />
• pension entitlement:<br />
Not applicable<br />
• other compensation components: € 1,895.95<br />
n<br />
Management committee<br />
The total gross compensation that was paid to the members<br />
of the Management Committee over <strong>2011</strong>, with exception of<br />
the Managing Director, amounts to:<br />
• base salary: € 622,501<br />
• variable portion: € 65,986<br />
• pension entitlement: € 120,471<br />
• other compensation components: € 127,220<br />
He receives no compensation as a director within the Board<br />
of Directors.<br />
Specific explanation required as per the Companies Code<br />
n The average employment by occupational category:<br />
<strong>2011</strong> 2010<br />
EMPLOYMENT BY CATEGORY<br />
Directors 4.0 4.0<br />
Office personnel 847.8 833.9<br />
The consolidated <strong>financial</strong> <strong>statement</strong> for <strong>financial</strong> year <strong>2011</strong><br />
comprises the following companies:<br />
• <strong>Aquafin</strong> NV, Dijkstraat 8, 2630 Aartselaar, Belgium<br />
• Aquaplus NV, Ingberthoeveweg 21, 2630 Aartselaar,<br />
Belgium<br />
TOTAL 851.8 837.9<br />
Compensation granted to directors: See above<br />
No advances or loans were provided to directors by the<br />
Group or any of the companies of the Group.
<strong>Consolidated</strong> <strong>financial</strong> <strong>statement</strong><br />
75
<strong>Aquafin</strong> develops and implements<br />
effective solutions that provide cleaner<br />
watercourses and sustainable water<br />
(re)use. We respond pro-actively to<br />
expected developments in the water<br />
sector. As a result, and in a close<br />
relationship with our customers,<br />
we bring a customised realisation of<br />
European objectives nearer every day.<br />
<strong>Aquafin</strong> NV, Dijkstraat 8, B-2630 Aartselaar<br />
Tel. 03 450 45 11 n fax 03 458 30 20 n e-mail: info@aquafin.be n www.aquafin.be<br />
Publisher: Luc Bossyns<br />
Also available in Dutch n Aussi disponible en français