Consolidated financial statement 2011 - Aquafin

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Consolidated financial statement 2011
In summary, we can therefore state that the following
criteria must be satisfied in order to fall under the scope of
the interpretation (IFRIC 12 §5,7);
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• the agreement is a public-to-private concession;
• the grantor has control over or regulates the services
that the operator must provide with the help of
the infrastructure;
• the grantor has control over any significant remaining
interest in the infrastructure;
• the infrastructure is built or acquired by the operator for
the purpose of using it in the context of the concession
agreement;
• the contract between the operator and the grantor
determines the price at which the services are to be
provided.
Analysis of the concession agreement
Service Concession Agreement
One of the characteristics of a service concession
agreement is the nature of the services. The activities of
the operator must be a public service. (the so-called ‘public
service nature of the obligation’).
The services related to the infrastructure must be provided
by the operator to the public (in the broad sense of the term)
within a pre-determined policy. The management agreement
sets out the services between Aquafin and the government
contractually and determines which ´public´ services are to be
delivered, to wit, the expansion and the management of
the household wastewater treatment infrastructure.
A second condition is that Aquafin is responsible for at
least part of the management of the infrastructure and
associated services and does not operate solely as an agent on
behalf of the Flemish Region. In that respect, we report
that Aquafin does, indeed, run an operational risk, although a
limited one, for example when it fails to achieve the planned
delivery of infrastructure work.
A third condition concerns the payments for the services.
The management agreement states in Article 48 how
payment is to be done (i.e. an invoicing agreement between
Aquafin and the user, especially the Flemish drinking water
companies) and, implicitly, also the price that Aquafin may
charge.
And finally, there is a condition concerning the ownership
of the infrastructure at the end of the agreement. At the end
of the concession agreement, the complete infrastructure will
be turned over to the government at no charge. That means
that Aquafin does not, in fact, 'control' the infrastructure
as the IFRS understands 'control' and cannot sell or pledge it.
The expected economic life of the assets is longer than the life
of the concession.
Interpretation IFRIC 12 - Service Concession Agreements
as ratified on 25 May 2009 by the European Commission,
applies to Aquafin with respect to the activities under the
management agreement.
Within IFRIC 12, that kind of infrastructure is recognised as
financial assets (financial asset model) in Aquafin's case, not
as tangible fixed assets.
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Financial assets model
The operator posts a financial asset to the degree that an
unconditional contractual right exists to cash or other
financial assets for the delivery of services. A contractual right
exists if the grantor contractually ensures the payment of:
a) specified or calculable amounts, or
b) any negative difference between amounts received from
users of the public utility and specified or calculable
amounts, even if the payment is made dependent on
the condition that the operator ensure that the
infrastructure satisfy specified quality or efficiency
requirements.
The various compensations that the Flemish Region owes
to Aquafin are stipulated in Art. 43 of the management
agreement between Aquafin and the Flemish Region and
fit within the aforementioned conditions in order to meet
the definition of financial assets.
Art. 43 of the management agreement states:
"To fulfil its tasks under this agreement, to wit, the creation
and operation of sewer water treatment infrastructure,
Aquafin is entitled to compensation from the Flemish Region
that must cover all reasonable costs incurred and, with due
regard for the risk taken, ensure a minimum acceptable return
for the shareholders.