Consolidated financial statement 2011 - Aquafin

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44 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); n • 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. n 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.
This compensation covers all actual reasonable costs incurred by Aquafin within the meaning of Art. 35 of this agreement, as well as all levies and taxes owed by Aquafin for the execution of this agreement, including environmental levies, all payments due to third parties and all of the payments owed to the Flemish Region with the exception of fines, compensation for damages for late delivery in accordance with the provisions of articles 41.3, 41.4 and 41.5 of this agreement, lump-sum payments under art. 41 of this agreement and compensation for damages to third parties due to illegal acts, and are paid in accordance with this chapter. Without prejudice to the provisions of Art. 18 of this agreement, this payment comprises four elements, to wit, recovery of (a) Investment Spending, (b) Working Expenses, (c) Fixed Costs and (d) Financing Costs." Art. 43 gives an unconditional contractual right to receive payment from the Flemish Government (in its capacity as grantor). The grantor also has few or no possibilities for avoiding payment; it is effectively enforceable in law. The primary impact of the model on the financial position and results of the group concerns the treatment of its tangible fixed assets. The tangible fixed assets that fall within the scope of this interpretation are not recognised as tangible fixed assets, but as financial assets that comprise the payments to be received from operations and establishment of the concession. As per Art. 43 of the management agreement, the contractual rights of Aquafin are unconditional and therefore satisfy the definition of the financial assets model. n IFRIC-12 receivables shown in the balance Long-term receivables management agreement Long-term receivables (i.e. receivables over more than one year) as a result of the application of IFRIC 12 comprise the following categories: The tangible fixes asset shown in the IFRIC 12 receivables comprises: • Wastewater treatment infrastructure delivered to the Flemish Region. For the part of those investment projects and replacement investments not yet repaid on the reporting date, and that will be received over more than a year, the group recognises a long-term receivable with respect to the drinking water companies/the Flemish Region, valued at an amortized cost price. • Infrastructure taken over from the Vlaamse Milieu - maatschappij (Flemish Environmental Agency). The group is also entitled to receive payment from the Flemish Region in the amount of the as yet not repaid part and valued at the amortized cost price. The part that is to be recovered over more than one year is shown in the longterm receivables. • Hydronaut studies are studies that are carried out to develop a correct design of the associated supra - municipal investment project. These studies are also carried out in the context of the management of existing infrastructure. They are charged over a period of 15 years to the Flemish Region/the drinking water companies. For the part of those studies not yet repaid on the reporting date, and that will be recovered over more than one year, a long-term receivable is recognised. • Investments in hardware, software, laboratory equipment, furniture, materials and equipment required for the functioning of the head office and investments in hardware, software, laboratory equipment, replacement investments, electromechanics, extraordinary maintenance of construction and electromechanics, furniture, etc., are charged to the Flemish Region/the drinking water companies pro rata with the write-offs booked. For the part of those investments not yet repaid on the reporting date, and that will be recovered over more than one year, a long-term receivable is recognised. (in €000) 2011 2010 At 1 January 2010 Tangible fixed assets included in IFRIC 12 - receivables 1,917,827 1,678,636 1,438,906 Provisions for pensions 6,313 6,644 6,283 Fair value financial instruments 132,419 42,482 18,996 TOTAL 2,056,559 1,727,763 1,464,186 Consolidated financial statement 45
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Consolidated financial statement 2011 - Aquafin

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