Annual Report 2010 - AdP

Notes to the consolidated financial statements
1. General information
1.1. Introduction
AdP - Águas de Portugal, SGPS, S.A. (henceforth also referred to as AdP Group) was established on 29 September 1993, head
quarter at Rua Visconde Seabra nº3 in Lisbon. AdP, SGPS, S.A.’s shareholders are Parpública, SGPS, S.A. (72.18% of share capital),
Parcaixa, SGPS, S.A. (19.00%) and the Direcção Geral do Tesouro (National Treasury) (8.82%).
AdP, SGPS, S.A. was given the responsibility for developing in Portugal of multi-municipal systems for the collection, treatment and
distribution of water for public consumption, and the collection, treatment and disposal of urban waste water and the treatment of
municipal solid waste. In 1998, the Company’s mission became broader, initiating a diversification process in terms of business segments
and geographically broadening its work to the segment of water distribution and wastewater collection from the populations served
in the domestic and international markets.
1.2. Economic activity
1.2.1 Regulated and conceded activity
The concession contracts model created for the multi-municipal systems has the following characteristics: (i) concession infrastructure
and equipment are constructed or acquired by the concessionaire company; (ii) the financing of these acquisitions/constructions is
partially conducted with EU grants and long-term financing conducted by the European Investment Bank; (iii) the concessionaire is
obliged to create a capital replenishment fund (in order to cover the return of the invested capital at the end of the concession);
(iv) the sale prices (tariff) practiced are set by the Awarding Authority and approved by the regulating entity (ERSAR) and include
a portion of capital return corresponding to a base rate of Treasury Bill issues (TBA). The six month Euribor rate or the Treasury
Bonds (TB) rate accrued by three percentage points as a risk premium. AdP Group has ensured its remuneration through rebalancing
clauses of the concession contract. These concessions generally have a duration of 30 years.
1.2.1.1 UNA-PD (Water Production and Purification)
The companies that make up this segment have a concession attributed by the State under an exclusivity regime to supply water
and wastewater sanitation services. The concession contracts include high level of investment to be conducted by the concessionaire
company. Financing is obtained via European Community funds, bank loans, total equity and internally generated resources, while the
municipalities to whom the company supplies services are also shareholders. The service supplied is paid via the tariff established by
the Awarding Authority, approved by the regulator (ERSAR) and invoiced to the municipalities that are served by each concession,
and one of the characteristics of the concession contract is guaranteeing the return of invested capital.
1.2.1.2 UNR (Waste Business Unit)
In 2000, within the scope of the strategic guidelines for consolidating the main business group within the area of environment, AdP,
SGPS, S.A began to fully own Empresa Geral do Fomento, S.A (henceforth also known as EGF) and via this company controlled its
affiliates, which were given the responsibility of developing multi-municipal systems for collecting and treating municipal solid waste.
The companies that make up this segment have a concession attributed by the State under an exclusivity regime to manage and
improve solid waste (Waste area). Concession contracts include high levels of investment to be made by the concessionaire company
and financing is obtained via European Community funds, bank loans, shareholder equity and internally generated resources, while
the municipalities to whom the company supplies services are also total. The service supplied is paid via the tariff established by the
Awarding Authority, approved by the regulator (ERSAR) and invoiced to the municipalities that are served by each concession, and
one of the characteristics of the concession contract is guaranteeing the return of invested capital.
1.2.1.3 Partnerships
The companies that make up this segment are the result of a contract between the Portuguese State and the municipalities that
make up the Partnership, and via the Partnership they have decided to group together the respective systems into a territorial
system of water, also consisting of infrastructure and equipment constructed by the Partnership, according to a general technical
solution and have delegated to the State, under a public partnership regime, operation and management of water services. As such,
the Partnership has exclusive rights over water for public consumption and, when applicable, collection and treatment of water for
this purpose, as well as exclusivity over collection of urban wastewater and, when applicable, the respective treatment and rejection
in the areas covered by the System. They also include construction, renovation, repair, maintenance and improvement of infrastructure,
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