Consolidated financial statement 2011 - Aquafin

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16 Consolidated financial statement 2011 In 2011, the amount not paid out by the ABR insurer was partly recovered from the study bureau that made the design error and partly from the inspection body that was active on the job site. Those recovery procedures are ongoing. For the part not paid by the ABR insurer, a provision has been made as a precaution. n Problems with concrete at the Bruges WWTP During the provisional delivery of the renovated waste - water treatment plant in Bruges, an outline of the armouring in the concrete was detected in one of the aeration basins. It was determined later that the damage continued to spread, and not only in this basin. An analysis commissioned by Aquafin identified two causes: insufficient concrete coverage and increased chloride values. A repair methodology was devised in consultation with the contractor. Where necessary, the concrete has to be repaired and augmented. Additionally, cathodic protection also has to be implemented. The actual repairs were carried out over the past few years and are continuing in 2012. The costs of the first part of the repairs referred to were borne by the contractor, the costs for the last part by Aquafin. A settlement has been reached between the insurance company and the policyholders and between the policyholders themselves. The ABR insurance company, ACI, paid out a substantial amount. That amount covered the repair and protection measures already taken and will also cover the costs of the work that is still to be done. In this dossier, the facts don’t show the necessity of making provisions. FINANCIAL REPORTING Inasmuch as the methodology of the management agreement provides for a posteriori approval of Aquafin's annual financial report, the possibility that some compensations may not ultimately be approved by the Flemish Region cannot be discounted entirely. The most important developments after the close of the financial year APPROVAL OF THE OPTIMISATION PROGRAMME 2013 On 16 December 2011, the Flemish Government again set the budget for the expansion of the supramunicipal water-treatment infrastructure for programme year 2013 at €250 million. On 31 January 2012, the assignment to implement that programme was presented to Aquafin by the Flemish Minister of the Environment Joke Schauvliege. The optimisation programme 2013 provides for a budget for 134 new projects and 21 projects that have been moved into this programme. In addition, the study work only (preparation of the technical plan) was assigned for 10 projects. The initial estimates for those projects amount to €112 million, €74 million of which has been designated for capital spending under the local pact with the municipalities. To cope with future price increases for those projects, €88 million has been reserved. In this programme, the remaining €50 million has been explicitly allocated to cover the overruns of the investment and renovation programme from previous programme years. The optimisation programmes are being drawn up by the Vlaamse Milieumaatschappij (Flemish Environmental Agency), in consultation with Aquafin, the provinces and the basin administrators. They include projects that focus on the additional sanitation of various discharge locations, the construction of small-scale wastewater treatment works and the construction of strategic rainwater piping to improve the existing infrastructure. When choosing the projects, attention is given to their ecological and economical profitability.
Comments with regard to the consolidated balance sheet At the end of the financial year, the balance sheet total amounted to €2,296 million, which is €425 million higher than the last financial year. That increase is largely due to the growth of the long-term receivables in the context of the management agreement. This increase of those receivables is due to a net growth of investments in the water treatment infrastructure, which have been carried out at the order of the Flemish Region. In 2011, for example, investment and optimisation projects of a total contracting value of nearly €146 million were delivered. On the other hand, Aquafin bought plants from the Vlaamse Milieumaatschappij (Flemish Environmental Agency) in 2011, for nearly €154 million as part of the implementation of addendum No. 7 to the management agreement. All of the plants remain the property of Aquafin until the end of the management agreement with the Flemish Region. The assets under construction, which saw growth of 8% to €271 million in 2011, are part of those receivables. The compensations that are yet to be invoiced for work outside the management agreement are included under the other financial assets. The increase in that entry is the result of the increased construction activity for similar 'commercial' projects. In 2011, Aquafin found itself facing greater financing requirements than it had in previous years due to the purchase of property and plants of the VMM in the context of addendum no. 7 of the management agreement. The banks were limited in their ability to provide additional loans because they were themselves confronted with increased costs and new regulations. Belgian institutional investors, on the other hand, were very interested in financing Aquafin. That opportunity was therefore utilised to the full: €285 million in financing was obtained via that channel. Inasmuch as it was not possible to apply that full amount to financing projects immediately, there was a temporary cash surplus and investments of nearly €53 million were made. In 2012, those funds are to be used to finance projects. The provision for risks and charges relates to legal disputes, insurance dossiers, disputes in the context of the execution of the management agreement, and processing the sludge buffered in the plants. Long-term financing is based on the allocation agreement. It stipulates that the balance of the long-term credits must be smaller than the future claims that Aquafin has on the drinking water companies and the Flemish Region, respectively. These claims consist of the parts of the investment projects that have not been paid, but that have already been delivered. At the end of 2011, this sum amounted to €1,495 million. In 2011, Aquafin had taken up €510 million in long-term credits, €75 million of which was with the European Investment Bank, €150 million with commercial banks, and €285 million with institutional investors. Taking the repayment of loans that had already been taken up into account, the balance of the longterm bank debt under affectation amounts to €1,459 million, nearly €157 million of which must be repaid within the year. At the end of 2011, short-term financing had been reduced sharply due to the long-term financing of the VMM assets purchased. In the past book year, there was a decrease in shortterm financing via commercial paper, from €140.6 million at the end of 2010 to €73.0 million at the end of 2011. Aquafin has a credit line of €180 million, including the syndicated loan for the short-term financing of activities in the context of the management agreement. None of the credit line was taken up by the end of 2011. Aquafin has a credit line of €17 million available for the short-term financing of municipal projects. Of that amount, €9 million was taken up by the end of 2011. Aquafin uses derivatives to hedge interest risks arising from the financing activities. The (negative) market value of the hedging structures is included under the other long-term financial liabilities. In the context of the financing for the aforementioned purchase of plants from the VMM, the capital was increased by €50 million on 13 December 2011. Of that amount, €12.5 was deposited. Report of the Board of Directors 17
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Consolidated financial statement 2011 - Aquafin

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