Annual Report 2010 - AdP

average, the budget cycle of a multi-municipal water system was about 136 days (a minimum of 73 days and a maximum of 258).
The average cycle for a multi-municipal waste system was about 136 days (a minimum of 82 days and a maximum of 275 days).
The extended period for assessing and approving budget and tariff proposals resulted in undermining relationships with end users
and had a significantly negative impact on company treasuries because of the difficulties end-users had in accepting the effects of
setting tariffs from January.
Although the multi-municipal systems sometimes presented their budget and tariff plan proposals late (25 companies delivered them
on time, four companies were late by six to 36 days, and one company did not present a proposal given its tariff results from the
signing of the concession contract), the biggest impact was caused by the extended period taken up by the Regulator’s analysis of
the proposals and the responses to the Regulator’s findings.
Águas do Douro e Paiva for the first time submitted a pluri-annual budget and tariff project. This proposal was accepted with the
company budget and tariff (set for the period at the price in effect in 2010) approved for the 2010-2012 period.
The budget cycle for 2011 began in September 2010 and was concluded for many companies within the legally established framework
through to the end of March, hence representing a very significant improvement in the regulator’s compliance with deadlines.
In accordance with the regulatory system in force (service cost) and the terms of the concession contracts, differences may arise
between the amount of revenue required to cover the total costs incurred by the system managing company, including corporate
taxation and return on equity, and the amount of revenue generated in each financial year. These differences are called cost recovery
discrepancies.
These discrepancies are shortfalls when the revenue generated is less than required and surpluses when it is more than required.
The AdP Group’s consolidated financial statements for 2010 show cost recovery discrepancies totalling €175.5 million (before
taxation and minority interests), of which €310.8 million was a shortfall relating to water services and €135.3 million in a surplus
relating to recovery of costs.
The following chart shows the evolution of cost recovery discrepancies (before tax and non-controlled interests) in the consolidated
financial statements of the AdP Group from 2005 to 2010:
45.6
(8.3)
112.0
Cost Recovery Shortfalls
(€ million)
(46.7)
158.6
(57.6)
209.9
(104.7)
2005 2006 2007 2008 2009 2010
Déficit Surplus
262.5
(124.9)
310.8
(135.3)
During the course of 2010, the Regulator put forward a legislative proposal for the recovery of the deficits and surpluses in the
recovery of costs regarding each multi-municipal system given this is not stipulated in the concession contracts or the applicable
legislation, which was not in the meanwhile approved.