2010 Annual Report - English

Contents

2010 HighlightsOur Mission, Vision and ValuesChairman’s MessageBoard Of Directors Managing Director’s MessageSenior Management Organizational StructureOur BusinessOur StrategyAchievements

Power projectsWater projectsThe Settlement High Specification Tariff Quality MetersGCC Interconnection ProjectNetwork Expansion StrategyEtisalat-Du ContractITOMSASTRO & PAS55 HSEQEmiratization

Financial Review

35781114161718212325

272829303132343643

Total number of employees: 925Total number of UAE Nationals: 23933 Different nationalities

Highlights

TRANSCO Annual Report 2010 • 5

Vision

TRANSCO will be the acknowledged re-gional leader in the transmission of potable water and electricity and provision of related services.

Mission

TRANSCO will ensure the availability of an essential public service while transmitting po-table water and electricity reliably, securely and safely whilst achieving the optimum bal-ance of performance, risk, cost and sustain-able development.

Values

Corporate CultureStakeholder Focus

► Provide an unsurpassed client experi-ence & drive value for all stakeholders

Technical Excellence

► Maintain certified international standards for equipment and process quality

Teamwork

► Promote cross-division team work and knowledge sharing

► Embrace challenges, accept and adapt to change and learn from both success-es and defeats.

Continuous Improvement

► Promote a culture of continuous improve-ment through disciplined performance management, performance benchmark-ing, and regular collection of customer feedback

► Encourage innovation & culture of learn-ing & development

Ethical ConductSocially Responsible

► Contribute positively to the development of the UAE

Ethical Business Practice

► Operate following the highest ethical &moral standards

► Management & employees to communi-cate with respect & integrity

Vision, Mission & Values

Investing for life.

As Chairman of TRANSCO, I take pleasure in presenting to you my message for 2010. TRANSCO has during the past year continued to provide a level of service to our customers that ranks among the top performing transmission companies in the world. We have achieved this through investing not only in our network, but also in our staff. I recognise that continued commitment by our staff is key to ensuring that we build, operate and maintain a transmission network that supports the objectives of the Emirate.

So what rewards do we reap by in-vesting for life?

During 2010, the business has successfully taken steps to expand the scope of services provided in the planning, development and operation of water and electricity transmission assets outside of the Emirate of Abu Dhabi. This action continues to pay dividend for all concerned and ensures that our customers in the Northern Emirates have an opportunity to enjoy a level of service that is consistent with that already experienced by those in the Emirate of Abu Dhabi. We have also recognised the need to ensure support to other Gulf states through proactive participation in the Gulf Co-operation Council Transmission Interconnection Authority. Not only has this seen TRANSCO play an important role in that authority, but also provides the Emirate with financial and technical benefits, which will continue for many years.

Our transmission network has continued to expand to meet the growing demand of the Emirate and thereby supports economic development of the region. Such expansion continues to be delivered in an efficient and effective manner. As custodian of a vast transmission network of power and water assets, we recognise the responsibility we are entrusted with and ensure that the network is developed in a manner that balances investment with need and operating practice. This is achieved by working closely with other companies in the sector and is strengthened by our commitment to strategic co-operation with such companies.

Finally, our commitment to helping ensure translation of the 2030 vision of the Emirate, as developed by the Abu Dhabi Executive Council, is a vital component in shaping the future of the network and manner by which we will continue to ensure the availability of water and power to all users. Our collaboration with the Abu Dhabi Government also extends to the endorsement and active promotion of an Emiratisation programme to attract, develop and retain qualified UAE nationals.

With a more focused and sharper concentration on our core capabilities and renewed emphasis on operational performance, we are well placed to build on recent achievements and continue to meet expectations in the future.

Chairman’s Message.

Dr. Abdulla Al Suwaidi


8 • TRANSCO Annual Report 2010

Board of Directors

Dr Abdulla Al Suwaidi ChairmanAbdualla Al Suwaidi has been part of the sector since becoming advisor to ADWEA’s Chairman in 1997. His qualities and high standards of work led him to be appointed Chairman of the Abu Dhabi Transmission and Despatch Company (TRANSCO), Chairman of Gulf Total Tractebel Power Company and Vice Chairman of ADWEA’s General Tenders Committee. He also chairs the board of Sohar Aluminium Company. Abdualla holds a BSc, masters and PhD degree in economics; he has written five books and has contributed to many research studies. He is also an avid participant of conferences and seminars throughout the country and worldwide.

David Copestake MemberDavid Copestake joined TRANSCO in 2003 as Managing Director, bringing with him more than 25 years of professional experience in the power and water industries of Europe and the Middle East. David has strong business, financial and customer service skills, backed up by wide-ranging experience in engineering, commercial and performance management. He holds a bachelor’s degree in electrical engineering, is a Fellow of the Institution of Engineering and Technology and a member of the Chartered Association of Certified Accountants.

Ahmed Al Murikhi MemberAhmed Al Murikhi has been Chairman and Managing Director of the Abu Dhabi Distribution Company since 1999. Prior to that, he worked in WED for 20 years. Ahmed is also Chairman of the Shuweihat Power Company and Shuweihat CMS International Power Company. He is actively involved in the National Marine Dredging Company board and holds a bachelor’s degree in electrical engineering.

Saeed Al Ameri MemberSaeed Al Ameri joined the Al Ain Distribution Company in 1998 as Deputy General Manager, becoming the Managing Director and Chairman at a later date. He brings with him a vast amount of experience gained while working in WED as the manager of a training institute. He currently holds seats on the boards of both TRANSCO and Shuweihat. A major initiative he is driving is the privatisation of the water and electricity services within Al Ain city. He has a bachelor’s degree in business administration.

Dr Hassan Al Hosani MemberHassan Al Hosani has been with ADWEA since 1974. He is currently Director of the Projects Division and has vast experience in planning, preparing and executing various issues related to power and water projects, as well as ensuring the effective utilisation of departmental resources. Hassan is Chairman of Emirates CMS Power Company and an ADDC board member. He holds a PhD in galvanic corrosion in desalination plants from the University of Bradford.

Asma Al Falasi SecretaryAsma Alfalasi was appointed secretary of TRANSCO Board of Directors in November 2009. Prior to Asma,s current role as manager of Business Planning and Performance Department in TRANSCO, she served for 6 years in the field of strategy and stakeholder relationship within UAE. Asma achieved her Masters in Business Administration from Coventry University in the United Kingdom; Subject of graduation: “Drive Strategy into Action in ADWEA”. The small but significant changes made within the organization, starting with her own department have been due to her passion for perfection and leadership sprit.


Annual performance improvements are all the more impressive when viewed against the significant growth in both electricity and water demand experienced by our customers within the Emirate of Abu Dhabi and those connected to our growing external network. Such growth creates challenges for many aspects of our business and I am pleased to say that our staff and external workforce continue to achieve the targets set.Unlike many other businesses, TRANSCO operates in a robustly regulated environment. This environment ensures that we provide our customers with the best value for money. We continue to recognise the importance of ensuring that stakeholders remain at the centre of our decision-making process across all business delivery areas. This year, we have embarked upon a review of business policies and procedures in order to maintain this focus. This review will be a cornerstone of future key business initiatives. As part of our commitment to the needs of stakeholders, we have undertaken to increase the level of discussion and information released to our regulator, thereby ensuring that greater transparency contributes to the already good working relations developed with all regulatory bodies. Our ability to manage this external environment ensures that we are aware of and can effectively manage business risk. By doing so, we create an opportunity to enhance our business performance.

Our initiatives are intended to build upon the improvements seen this year in relation to capital delivery and operational control. We have, however, a number of stretch targets yet to reach if we are to fully deliver our mission. These targets include delivery of an enhanced capital programme. During 2010, we successfully delivered an AED 5 billion capital programme for both power and water projects. Our ability each year to deliver a capital programme of this magnitude is a testimony to the team in our capital delivery service chain. Consistent

with my statement last year, this programme ensures that transmission capacity and network performance continues to support the performance and growth targets of the Emirate.

Our staff, both those directly employed by us and those employed by our capital and operational delivery partners, continue to be at the centre of our business strategy. As such, investment in staff development across key business areas continues to be a priority. We have successfully implemented a number of initiatives this year, including; formally strengthening our human resource processes to ensure individual career advancement is aligned with business success; proactive contribution to the establishment of an ADWEA Academy capable in providing a wide range of courses for the benefit of the ADWEA group, and a focused effort to enhance our culture in the areas of public services, safety and operating excellence.

As a major employer within the Emirate, we recognise and support our obligations in relation to promoting and delivering the Emiratisation objectives of the government. We are pleased to report that during 2010 we increased our Emiratisation percentage to 4.8%.

We recognise that certain challenges required to change some of the working practices adopted by our sub-contractors still exist. It is with regret that I must report that, as a consequence of these current practices, the company has experienced three fatalities; our sympathy and thoughts go out to the families of these men. We are determined that such practices shall be corrected and, if companies fail to implement safe working arrangements, they will cease to be employed by us. As part of our ongoing commitment to improving contractor performance, we have built upon the initiatives implemented in 2008 to try to change the mind sets and behaviours of our

Managing Director’s Message


external workforce. In 2009, we identified the poor level of leadership support provided to workers on-site. We have held a number of leadership workshops with the external workforce and ensured adherence to good practices through increased health, safety and environmental audits.

We have successfully delivered another good set of financial results, in both regulated and non-regulated activities. Performance of the regulated market is sensitive to the actual level of demand and the volume transmitted against that forecast during the setting of the Price Control allowance. We recognise this risk and continue to work closely with the regulator to ensure any material variation is managed to a level acceptable to all stakeholders. The revenue risk due to non-compliance with the Meter Data Exchange Code (MDEC) by the distribution licensees continues to exist. This matter has continued to be a key business focus during 2010; as a result, we have significantly reduced our risk exposure. Nevertheless, a risk still exists and we are presently working on our plan, so that, by the close of 2011, we will be in a relatively neutral risk position. As part of our risk strategy on this matter, we have engaged with the Bureau in an attempt to limit business impact. In order to deliver on this commitment, we will reinforce our engagement with distribution licensees and service providers that influence the level of MDEC compliance. The performance of our networks has continued to be good and we are optimistic that this will make a positive reflection in the regulator’s Performance Incentive Scheme due to be announced in the first quarter of 2011.

Our non-regulated market continues to deliver the forecast return expected at the time of investment. Other similar investment opportunities that have arisen during the course of the year continue to be assessed

in order to ensure that an acceptable level of risk is understood prior to any commitment of funds being agreed.

During 2010, we have continued to monitor our performance with the regulatory contract implied in our acceptance in 2009 of the Price Control 4 proposals. Although the business faces a number of difficult challenges in relation to capital performance and managed operating expenditure, we are nevertheless confident that during the next three remaining years of the control our performance will continue to meet the targets expected by the regulator. In anticipation of this need, the business commenced two key business initiatives: Capital Assurance and Asset Management improvements, sufficient to warrant PAS55 accreditation. During 2010, the business’s commitment to delivery of these key initiatives has been excellent. My thanks go to all the staff in the organisation for their input and additional effort given.

I remain confident that the business is well placed and in good shape to deliver against its objectives and continue to make the progress necessary to realise the company’s vision.

Managing Director’s Message

David Copestake


Senior Management

Senior Management Team Members

1. Managing Director: David Copestake2. Asset Management Director: Dr. Najib Dandachi3. Network Services Director: Salem Al Harthi4. Projects Division Manager: Saif Al Qubaisi5. Business Planning and Performance Department Manager: Asma Alfalasi6. Health, Safety, Environment & Quality Department Manager: Paul Roberts7. Finance Department Manager: Ahmad Al Mazrouei8. Supply Department Manager: Maha Al Neaimi9. Human Resources and Administration Department Manager: Fatema Al Hammadi


Core Accountabilities

• Manage the organisation to ensure power and water is despatched and transmitted safely, efficiently and reliably, in accordance with the organisation’s licences and the laws of the UAE

• Maintain a safe and healthy workplace without damage to the environment

• Ensure that all areas of the organisation are manned by competent and trained persons

• Lead the workforce, including contractors, in an open and communicative manner according to the organisation’s values, while encouraging initiative and teamwork to produce better business performance

• Maximise profits under the terms of the organisation’s price control, while ensuring the reliability and operability of the plant in the longer term

• Prepare and submit the business plan, annual operating plans and capital budgets to the Board and to ADWEA for approval

• Review the proposed budget and submit for approval

• Develop and maintain policies (such as HSE policy) and ensure that all policies are consistent with those of the ADWEA Group

• Prepare and submit proposals to ADWEA for improvements in the organisation’s business processes and manning

• Agree performance targets with the Board and ADWEA and report performance against targets

• Ensure that accurate, audited financial statements are prepared and submitted to the Board in a timely manner

• Actively seek best business practices in power and water management and implement these within the organisation


Organizational Structure

Power

TRANSCO operates an efficient, regulated electricity transmission and despatch network across most of the United Arab Emirates, delivering electricity transmission services to distribution and production-licensed customers. As a critical infrastructure provider, the network is developed and operated in a manner that supports the needs of all our customers. Through co-ordination with other licensees across the utility sector, TRANSCO has developed a network that meets demand forecasts, enabling the Emirate of Abu Dhabi and other Emirates to grow economically, in keeping with the government’s vision.

Water

Water is considered one of life’s key ingredients and TRANSCO is pleased to be the provider of critical infrastructure that ensures the safe, secure and timely transmission of water capacity throughout the Emirate of Abu Dhabi. By co-ordinating with other licensees across the utility sector, TRANSCO has developed a network that keeps pace with economic growth forecasts in the UAE.

Regulated activities

TRANSCO is responsible for transmitting power from generation plants through a complex network of interconnected substations, cables and overhead lines. Drinking water is primarily produced through production plants that require the water to be evacuated through an interconnected network of pipes and pumping stations to our customers, the licensed distribution operators.

TRANSCO is responsible for ensuring that all electricity and water exit points from the transmission network are metered by registered operators. Each meter registrant is

obligated to comply with an industry Metering and Data Exchange Code (MDEC), which is administered by TRANSCO. Our regulated activities comprise the operation of the licensed electricity and water transmission assets owned by TRANSCO in the Emirate of Abu Dhabi, the Northern Emirates and Western Region. This network supports the activities of a number of licensed distribution operators that ensure the supply of power to commercial, industrial and residential customers.

TRANSCO is regulated in terms of transmission use of system charge and network performance. The Regulation and Supervision Bureau (RSB) reviews the revenue that the company is able to recover every four years. In addition, network performance and capital and operating performance are assessed each year. TRANSCO is currently in the fourth price control period, which commenced on 1 January 2010. The type of business in which we engage is capital intensive and highly regulated in the areas of network performance, health and safety and economic performance.

Non-regulated activities

TRANSCO’s non-regulated activities are based on the core utility skills of our regulated business. Non-regulated activities include the provision of dedicated electricity and water transmission networks to Emirates located outside the Emirate of Abu Dhabi. These services have experienced considerable growth as the support to neighbouring Emirates has increased. The expansion of both the regulated and non-regulated activities has been undertaken in a co-ordinated manner that ensures TRANSCO remains focused on improving network performance and customer service.

Our Business


The ever increasing economic growth of the Emirate of Abu Dhabi and the UAE means that TRANSCO needs to match this growth, as well as be more organised and efficient in conducting its business. Keeping in mind the vision and strategic objectives of the Abu Dhabi Executive Council, TRANSCO has revised and refined its five-year business plan to better facilitate business growth and development.

TRANSCO led the group of companies in taking the initiative to drive forward with a business performance and planning vision in 2006. This was achieved vis-à-vis a five-year business plan and a two-year business plan with a basic performance monitoring system, including key performance indicators in various levels of the business and supportive initiatives, looking forward to use an automation system in the future.

Currently, there is a sound five-year business plan in place that only requires minor changes to the priorities, initiatives and key performance indicators (KPIs) under the umbrella of ADWEA in order to align it with the format requested by the Abu Dhabi Executive Council. This would enable TRANSCO to efficiently and effectively implement a business intelligence (BI) tool and/or a performance management system (PMS).

What we are doing? How our goals and priorities support the policy agenda via the whole government strategic planning?

• Supporting the development and operation of transmission networks across other Emirates

• Selectively developing new business opportunities where appropriate

• Promoting cross-division teaming, encouraging innovation and a culture of learning and development

• Attracting, developing and retaining qualified employees, particularly UAE nationals

• Contributing positively to the development of the UAE

• Developing and maintaining:• the region to lead standards of

service, assessed and supported by regular international benchmarking of performance

• a high performance organisation with a culture and practice of accountability, reward for performance, continuous learning and development

• international standards of health and safety

• positive and proactive relationships with key stakeholder groups

• best practice planning, management and operational processes

• a culture of environmental excellence• enhanced project planning and

financial evaluation capabilities

Our Strategy


Who benefits and how?

• Achieving the goals and objectives set forth by the government of Abu Dhabi in the area of infrastructure development

• Making Abu Dhabi and the UAE a better place to live by providing a safe supply of reliable power and water

• Developing UAE nationals by providing them with the necessary training and opportunities

• Contributing to society and the community through exclusive programmes

• TRANSCO becoming a more efficient company through a corporate culture change

In addition to the business plan, TRANSCO’s other key planning documents are: the Seven-Year Planning Statement (Electricity and Water), which contains the seven-year development plans and capital expenditure forecasts required to meet the growth and development requirements of the network; the Annual Asset Investment Plan, which contains annual capital expenditure plans and allocations; and the Annual Budget, which contains annual operating expenditure plans and allocations at a corporate level and for each directorate.


Achievements

400/132kV Grid Station at Fujairah

The 400/ 132kV grid station at Fujairah was built with a capacity of 2x500MVA, 400 /132kV transformers, 26x400kV bays and 21x132kV bays to evacuate power from the F1 power station (five gas turbines and two steam turbines) and from the F2 power plant (six gas turbines and two steam turbines).

As part of the ADWEA/TRANSCO power network development, the F1 power plant, with a generation capacity of 750MW, and the F2 power plant, with a capacity of 2,000MW, were built to meet the growing power demand in the Northern Emirates. To transmit the power from these power plants, the 400 /132kV grid station in Fujairah was installed and fully commissioned by July 2009.

These two power plants, F1 and F2, are based on combined cycle technology, hence eliminating the consumption of diesel and thereby reducing the government subsidy.The cost of the project for stage 1 of the 400 /132kV grid station at Fujairah is AED 512,395,758

400/132kV Grid station at Fujairah City

The 400 /132kV grid station at Fujairah City is being built with a capacity of 3x500MVA, 400132/kV transformers, 11x400kV bays and 23x132kV bays to transmit and distribute power to the Northern Emirates and to feed the industrial and domestic loads. The contract was awarded to ABB. The project is scheduled to be completed by 31 May 2012.

The 400 /132kV grid station is important in receiving power from the F1 and F2 power plants, with a total generating capacity of 2,750MW, and transmitting the power to various 132kV transmission substations in the Northern Emirates to meet growing power demand.

The power from the 400 /132kV grid station at Fujairah City is transmitted to the 132 /33kV substations at Sudah Port and Al Hayl, which are under construction by TRANSCO. Furthermore, the power from the 400 /132kV grid station is transmitted to the 132 /33kV substations at Gurfa, Masafi, Munay and Fujairah Main, owned and operated by FEWA. The power is distributed to industrial and domestic loads in the Northern Emirates by FEWA through the FEWA 33kV network. The cost of the 400 /132kV grid station at Fujairah City is AED 416,164,035.

400kV Grid station extension at Shuweihat

The existing 400kV grid station at Shuweihat was extended by 6x400kV generator bays, 2x400kV cable feeder bays to S3 Plant, 2x400kV OHL bays to Sila 400kV GCCIA grid station. The total capacity of S2 power station (four gas turbines and two steam turbines) is 1,600MW.

As part of the ADWEA/TRANSCO power network development, the S2 power plant, with a generation capacity of 1,600MW, is being built to meet the growing power demand in Abu Dhabi and the Western Region of the Abu Dhabi Emirate. In clouding ADNOC group of companies It is important to extend the existing 400kV grid station at Shuweihat to evacuate and transmit power from the S2 power plant.

The cost of the project is AED 202,573,609.

400/220/33kV Grid station at ICAD

The 400 /220 /33kV grid station at Industrial City Abu Dhabi (ICAD) is being built with a capacity of 3x500MVA, 400 /220kV transformers and 6x100MVA, 220 /33kV transformers. The power is received from Umm Al Nar and Shuweihat power plants

Power Projects


through 4x400kV OHL circuits and distributed to various industries in the ICAD area. The contract was awarded to Toshiba at a cost of AED 642,000,000. The project is expected to be completed by 30 April 2011.

The 400 /220 /33kV grid station at ICAD serves to reinforce the existing 220kV network in the Mussafah area and also meets the power demand from various industrial units under construction in the ICAD area.

The cost of the 400 /220/ 33kV grid station at Industrial City Abu Dhabi is AED 642,000,000.

New 220 /33kV ICAD-A (SS-2) Sub-station & New 220 /33kV ICAD-D (SS-5) Substation

The two new 220/ 33kV substations at Industrial City Abu Dhabi (ICAD) are designed with a capacity of 6x100MVA 220/

33kV transformers (SS-2) and 3x100MVA 220/ 33kV transformers (SS-5). Substations are connected to the 400 /220 /33kV grid station SS-1 through 220kV XLPE cables (SS-2) and 220 kV OHL (SS-5). The award of the contract to the lowest bidder is awaiting Abu Dhabi Executive Council approval. The project is scheduled to be completed within 24 months of the letter of award.

The SS-2 and SS-5 new 220/ 33kV substations connected to the 400 /220 /33kV grid station SS-1 at ICAD serve to reinforce the existing 220kV network in the Mussafah area and also meet the long-term power demand from various industrial units under construction in the ICAD area.The cost of the two new 220 /33kV substations at ICAD (SS 2) and (SS 5) is AED 332,358,311.

Power Projects


Water Supply to Saadiyat Island

The main objective of the project is to connect Abu Dhabi Island with Sadiyat Island. The project also connects Abu Dhabi Island with Al Reem Island.

Initially the pipelines within this project will supply water to Sadiyat and Al Reem Islands from Abu Dhabi Island, but ultimately the pipelines will be used to supply Abu Dhabi Island from Unit III Pumping Station via Sadiyat Island.

The project consists of three lots:

Lot A: A combination of 1,200mm diameter ductile iron and 1,600mm diameter carbon steel pipelines from Abu Dhabi Power Station (ADPS) to Zayed Port area, with a 1,200mm diameter branch to Al Reem Island via Sawa Island

Lot B: Twin sub-sea 1,200mm diameter carbon steel pipelines to connect the 1,600mm diameter carbon steel pipeline in Zayed Port Area with the 1,600mm diameter ductile iron pipeline in Sadiyat Island

Lot C: A 1,200mm diameter ductile iron pipeline from IP47A (intersection of Delma Street with East Road) in Abu Dhabi to connect with the pipelines in Al Reem bridge supplying Al Reem Island

In addition to the pipeline works, the project includes all the necessary civil, electrical and telecommunication works.

Water Transmission Lines inside Al Reem Island

The objective of this project is to connect Al Reem Island with the water transmission pipelines in Abu Dhabi from near to Al Reem bridge to meet the expected demand due to new development on the island.

Al Reem will be supplied by water from Unit III Pumping Station via Saadiyat and Sawa Islands after the transmission pipelines on these islands are completed.

The project involves construction of a 1,200mm diameter ductile iron pipeline on Al Reem Island. The work also includes the construction of a 1,200mm diameter ductile iron pipeline starting at a connection valve chamber constructed under project N-4399.

The 2.75km pipeline runs on Al Reem Island within service reservation given by Al Reem Developer to the north part of the island, with one main branch 1,200mm diameter ductile iron pipeline of 2.37km running to the east part of the island.

Water Supply Systems to Jazirat Al Hamra, RAK

This project’s objective is to supply Jazirat Al Hamra area in Ras Al Khaimah with water produced from the Fujairah Project and allotted for use by the Northern Emirates.

The project consists of 70km of 800mm diameter carbon steel pipeline, 5km of 800mm diameter and 19km of 600mm diameter ductile iron pipelines. It also consists of two concrete reservoirs at Al Hiniya, each with 1 million gallon storage capacity, and two steel tanks at Al Hamra, each with 5 million gallon storage capacity. The project also includes a hypo chlorination building, control room and security room. Additional works were executed as part of this project to supply water to VIPs.

Al Ain WTS / Tap Off 9A (FWTS) Pipeline to Al Hayer Tank (Lot P1)

The aim of this project is to supply water via 13km of DN 1600 welded CS pipeline from the transmission mains of Fujairah at Tap-off

Water Projects


9A to the Al Hayer area. A further objective is to make 50 MIG of water storage available in two steel tanks at the Al Ain Reception Complex. • DN 1600 carbon steel connections to

each of the twin DN 1600 transmission mains from Fujairah at Tap-off 9A, with one of the connections for a future pipeline; 13km of DN 1600 welded CS pipework up to Al Hayer, with associated chambers and equipment; dual fibre-optic cables along the pipeline route.

• Two welded steel tanks, of 25 MIG capacity each, at the Al Ain Reception Complex.

• All related electrical, instrumentation and control/SCADA equipment.

• Additional variation order works for water supply to HH Sheikh Khalifa’s farm at Madam, comprising 13km of DN 300 HDPE/DI pipeline, and water supply to HH Sheikh Mohammed’s farm at Madam.

Urgent Works at AARS, SAROUJ, KHABISI and HILI

The main aim of this project is to by-pass/upgrade the AARS, Khabisi and Hili pump stations in the Al Ain region. Valued at AED 52,804,272 the contract was awarded to Astraco and the consultant was Tebodin.

Based on the latest network development study report submitted by ILF for the Al Ain region, the chairman announced an immediate cancellation of the project’s original scope of work. The consultant and contractor were advised to suspend all project-specific site activities as of 25 September 2008. The contractor had, in the meantime, completed part of the work and procured all the pipes and accessories. Some of the materials were distributed to ongoing projects and the remainder are being transferred to TRANSCO stores.

A new scope of work was given to the contractor as compensation for the cancelled job, as follows:

• Automation of the existing water supply system at HH Sheikh Khalifa Palace from TO15 in the Al Shuweib area, with a value of AED 3,747,966.

• Water supply to Al Bustan zoological centre and poultry farm in Sharjah, with a total value of AED 7,927,916.

• Demolition of the Khabisi pumping station compound, with a total value of AED 23,294,798.

Water Projects


The Settlement High Specification Tariff Quality Meters

TRANSCO continuously reviews and considers viable means to improve the set up and performance of the grid across the interface between the transmission system and users, in relation to both generation/production and distribution issues. It is for this reason that TRANSCO embarked on an ambitious initiative to lead the installation of high-quality tariff meters to measure both power and water delivered to and from the transmission system. These meters are interfaced via a modern telemetry and telecom system to the Transco control centre, where the data is collected remotely, processed, verified and then issued to allow the production of financial invoices that reflect the power and water transactions. The strategic importance of this system stems from the fact that it is the auditable means to settle payment between the ‘market players’ under the terms of the

Power & Water Purchase Agreement (PWPA), the Bulk Supply Tariff (BST) and the Transmission Use of System (TUOS), the latter being the prime source of income for TRANSCO. This purpose-built, fully computerised settlement system is designed to ensure the TRANSCO settlement process becomes an internationally recognised system, utilised in energy markets and power pools in all developed countries.It remains to be said, on behalf of the ADWEA sector, that TRANSCO led the implementation of all components, explained the underlying set up, arranged the technical training and co-ordinated the compiling of appropriate procedures, which identified the roles and responsibility of all the relevant transmission system users, to ensure the reliability, operability and sustainability of the settlement system.


Background

The GCC Interconnection project was established to provide power interconnection between all GCC countries. As part of the project, GCCIA is building a 400kV switching station at Sila to establish connection with the UAE at a 400kV voltage level.In order to achieve the 400kV interconnection between Shuweihat and Sila, TRANSCO had to extend the 400kV GIS at Shuweihat by 2x400kV bays and construct a double-circuit 400kV overhead line (122.7km) between Sila and Shuweihat.

Current Status Of The Project

The 400kV GIS extension at Shuweihat is completed and was energised on 7 September 2010. All of the interface works for the Shuweihat–Sila interconnection have been agreed between TRANSCO and GCCIA, and TRANSCO is in the process of awarding contracts for the protection, telecom and control centre integration works for the Sila 400kV switching station by 31 March 2011.

The 400kV Shuweihat–Sila OHL work is in progress and is scheduled to be completed by the end of March 2011.

GCC Interconnection Project


Network Expansion Strategy

There is no doubt that TRANSCO takes pride in achieving network expansion, with a bold and aggressive strategy that supports the Government’s vision of growth and development over a large part of the United Arab Emirates. The Company had to confront numerous and complicated challenges imposed by rapidly increasing demand, together with a drive to meet best international design and operational standards. These challenges were successfully tackled and TRANSCO managed a substantial capital investment programme of power and water expansion schemes in order to establish sustained infrastructure in various regions of the entire UAE, not just in the Emirate of Abu Dhabi. The Northern Emirates, for example, were integrated with the rest of the high-voltage transmission network, which strengthened the grid through a widely meshed 400kV backbone network. This facilitated power transfer from and to the Emirates of Ras Al Khaimah and Fujeirah. Within the Emirate of Abu Dhabi, the network was developed to cover the islands of Saadiyat, Reem and Yas to provide necessary power and water supply for strategic development projects on

these islands. Equally, the Western Region featured another important scheme initiated by TRANSCO to strengthen the network interconnection and remove potential bottlenecks in preparation for additional power and water production being installed at Shuweihat. The Western Region is the connection corridor to the rest of the GCC countries via the planned Sila 400 kV Station, which is expected to be operational during the first quarter of 2011. During 2010, FAPCO power station, with a power capacity of 2,114MW and a water capacity of 130MIGD, was commissioned and is now under commercial operation. At Shuweihat, RPC (Rawais Power Company, known as S2) started commissioning activities and commercial operations will probably be underway by mid-2011.At the same time as the rapid expansion of power and water networks, TRANSCO is continuously expanding its highly sophisticated and modern telecom network to provide a highly reliable, advanced telecom media for SCADA/Metering/IT systems, required for operation and control of power systems.


TRANSCO’s business scope has led to the exploration of business synergy with the telecommunications sector, whereby Transco offers, from its UAE-wide power and water networks, fibre-optic leasing opportunities to licensed telecom operators and large industrial users. The company recognises the strategic benefits to the industrial sector and national economy as a whole that may be obtained by opening up its telecom network to Du and other possible external users.

As a result of this initiative, TRANSCO managed to establish strategic alliances with the two telecom service providers, Etisalat and Du, through an agreed MOU defining high levels of co-operation and support. This action was followed by an important contract agreement between TRANSCO and Du for fibre-optic utilisation in all technical and commercial areas. Stage one of the fibre-optic leased services led to revenues of AED 3.8 million for TRANSCO in 2009. In total, the company has earned AED 13,333,808 over the past two years and demand is increasing for dark fibre leasing services.This initiative has transformed the telecom business within TRANSCO from a cost centre to a profit centre, adding a new source of income for the company.

Etisalat – Du Contract


ITOMS

ITOMS (International Transmission Operation and Maintenance Study) is a benchmarking exercise designed to identify the best practices and best performers in the field of power transmission and to explore innovative and leading-edge practices from within and beyond the utility industry.

Benchmarking is the search for industry best practices that lead to superior performance. Hence, as part of TRANSCO’s ambitious vision to be an acknowledged leader in its field, the company participated in ITOMS as a means of comparing performance and practices within the power transmission industry worldwide.

ITOMS is a bi-annual exercise that was started in 1994. Today, 27 leading companies in the power transmission industry around the world participate. The programme objective is to share knowledge and encourage exchange of information and ideas on performance improvements and innovative working practices.

The mechanism of benchmarking is built on gathering data for all activities and functions in the field of operation and maintenance. This data is then analysed for better understanding of performance, gaps and comparison. Results obtained from an ITOMS exercise lead to improved efficiency in terms of productivity and cost, as well as improved effectiveness of participants in terms of services and outages – the two main drivers of benchmarking being cost level and service level.

We recently received the results of this benchmarking study and were selected from 27 global transmission companies as “Best Practice Performers” in six of the 10 operation and maintenance benchmarking disciplines.

TRANSCO’s participation in previous ITOMS studies provided the operations and maintenance group with a unique opportunity to systematically change its maintenance practices by adopting some of the best practices developed by the top-performing companies. Progressively, over the years from 2001 to 2008, practices were changed in line with other best practice organisations.

Our main goal for this managerial project was therefore met by demonstrating through the ITOMS forums that, by adopting these best practices, our overall performance in operations and maintenance showed a marked improvement. This was highlighted by TRANSCO being rated as one of the top ITOMS performers in the following disciplines:

• Circuit breaker maintenance 200+ kV• Circuit breaker maintenance 132 kV • Power transformer 200+ kV• Substation maintenance• Relay, SCADA and telecommunication

systems• Disconnector and earth switches


As Abu Dhabi is witnessing a number of major economic developments, the Executive Council General Secretariat (ADGSEC) has made a significant investment towards helping government entities develop their strategic planning and performance management capabilities. The ultimate goal of this initiative is to transform each entity into a performance-oriented organisation, each capable of contributing to the achievement of Abu Dhabi’s vision to be among the best five governments in the world by 2030.In an effort to align with this vision, the ADWEA leadership team has decided to embark on a major project dubbed ADWEA stratigic transformation (ASTRO). As the name suggests, ADWEA will seek to completely transform itself into a more efficient, customer-oriented and competitive organisation that will contribute significantly to Abu Dhabi’s overall development.Within TRANSCO, the first phase of the ASTRO project was completed successfully by the second quarter of 2010, as expected. The first phase finalised the strategy map by establishing priorities through a gap analysis. Once a corporate strategy map was created, the balanced scorecard for TRANSCO (corporate) was put together, which included KPIs to measure the priorities and initiatives to address any gaps. Further to this, a balanced scorecard was created as part of phase 1 for the three major directorates/divisions - Asset Management Directorate, Network Services Directorate and Projects Division. A communication strategy has been initiated by ADWEA in order to roll out a knowledge transfer of ASTRO to the employees.ASTRO phase 2 has started in the third quarter of 2010 to complete the balanced scorecard data of KPIs, including targets and detailed initiative cards. It will also create balanced scorecards for the remaining departments, including the Health, Safety, Environment and Quality department, Human Resources and Administration department, Supply Department and Finance Department. The balanced scorecard will replicate the corporate ones to include KPIs to measure the priorities and initiatives to address each

area’s gaps. Also, further progress and a roll-out of the communication strategy needs to be done as it is important to involve all employees to ensure success.To deliver the initiatives identified as part of the ASTRO exercise TRANSCO had recognized that many of these can be combined and delivered as part of one project. The current Strategic Asset Management model is being taken to the next level by adopting a framework of Asset Management principles, as used by many utilities in the UK and Australia. This framework is called Publicly Available Specification (PAS55), which is an internationally recognised approach to Asset Management issued by the British Standards Institute. It is a guidance of 28 criteria that covers all aspects of the life cycle of the assets, from initially identifying that changes are needed, through design, procurement and commissioning, to operation, maintenance and final decommissioning. The philosophy is based upon several key principles of Asset Management and doing the right things in the right way under a continual improvement framework of “Plan – Do – Check – Act”. The systems and processes in place should be holistic, systematic, systemic, risk-based, optimal, sustainable and, above all, integrated.Having joined-up systems and processes is important for TRANSCO, as there will be a significant level of investment in the power and water networks over the next five years. The development of improved capital assurance ensures that this investment is delivered in a timely and structured manner. An awareness of the whole-life costs of the interventions also ensures that we continue to provide value for money as we seek to accomplish the TRANSCO vision. By gaining this independent accreditation we are able to demonstrate to the regulator, our customers and stakeholders that we are leading the way in Asset Management within the region and contributing to Abu Dhabi’s masterplan in an efficient and effective manner.

ASTRO & PAS55



Type of incident 2007 2008 2009 2010

T C T C T C T CMajor incidents 0 0 0 2 0 3 0 3LTI 4 3 1 8 3 5 4 12Minor injury 2 37 2 282 1 524 4 461Environmental incidents 1 0 3 0 4 1 5 0Hazards/near miss 169 33 69 877 97 1327 230 308Occupational illness 0 1 0 2 0 0 0 0

T = TRANSCO incidents;C = Contractor incidents

TRANSCO performance figures for lost time and minor injuries were favourable in 2010. However, we experienced three fatalities of individual contractors. One contractor was new to TRANSCO, but had received an extensive induction. The other two contractors had worked for TRANSCO for a long time. Our overall performance was similar to previous years, but does not reflect the hard work we have put in with our consultants and contractors over the past three years to improve their compliance with the HSEQ Law, Regulation and ADWEA/TRANSCO requirements. One positive aspect of this is that proactive reporting by our contractors has improved over the past few years. We also received 10 formal customer complaints, which have all been investigated

and corrective actions taken.

This reporting data, which forms a vital part of the management system, is used to identify areas of weakness that need to be improved. Recognising this improvement, TRANSCO achieved silver certification from RoSPA for continued improvement in our own compliance and performance in HSEQ over the past few years.

During 2010, TRANSCO took a number of positive steps forward in managing its HSEQ responsibilities. TRANSCO HSE and Quality management systems were integrated into one system and implemented. We raised awareness of environmental issues through our HSE Week Awareness programme. A

Health, Safety, Environment and Quality (HSEQ)


Supervision Bureau. An action plan to deliver the areas of improvement will be part of our 2011 HSEQ objectives.

Although we have had good performance data, the three fatalities highlight the significant challenge we still face in improving our consultant and contractor compliance, competence and overall culture in terms of HSEQ. We have identified a number of key areas that will require our combined efforts if we are to ingrain a safety culture in TRANSCO, its consultants and, most importantly, our contractors. This will be our continued focus in 2011 as we seek to prevent any further contractor fatalities.

number of employee consultation forums were conducted to discuss HSEQ issues directly with staff. We also initiated supplier audits in which we audited the HSEQ management system of selected TRANSCO contractors and consultants and this process is now firmly established within our management system. We have introduced a consultant and contractor post-project evaluation process and have reviewed and updated our system safety rules, which determine how we manage hazards arising from our own operations. Also in 2010, TRANSCO registered with ADWEA to develop and implement a management system compliant with the new Abu Dhabi EHSMS requirements. We were audited by our regulator Lloyds in 2010 under the requirements of the Regulation and


The UAE national resettlement is one of the company’s strategic goals and represents part of the overall objectives of the Authority.

Emiratisation committee meetings are held regularly to discuss issues related to the employment of UAE nationals and specification of resettlement objectives, such as enhancing skill sets, the qualifications needed for work and development of a training plan. There was an increase of 2.3% in the number of UAE nationals employed. This falls short of the 5% target set earlier in the year, but solutions have been identified and improvements are expected in the future. Out of a total of 1,027 jobs, 643 posts have been identified as UAE national positions. Discussions have taken place about the development plan for training nationals, especially engineers and technicians. During the first year, training sessions will involve the maintenance division; the second year will focus on specific functions related to the trainee. Training schedules will be prepared by the departments themselves with reports submitted to the training and development unit for follow up. In 2010, 16 trainees completed the programme; 55 developees are continuing with their development programme and we expect to assign 33 trainees to their target positions.

In order for us to improve on our goals and achieve our target in the future, we are undertaking the following actions:

1. Focusing on UAE national trainees and resolving any conflicts between supervisors

2. Communicating the importance of teamwork and co-operation

3. Reward and compensation for outstanding trainers as a motivation for doing a good job

4. Incentivising UAE national developees to undertake shift duties by increasing the shift allowance

5. Establishing career paths for trainees6. Retaining experienced expatriates in

experience transfer positions (ETP), which are outside the approved organisation chart

Emiratisation Programme


Wat

er T

rans

mis

sion

Net

wor

k (U

AE)

Wat

er T

rans

mis

sion

Net

wor

k (A

bu D

habi

)

Pow

er T

rans

mis

sion

Net

wor

k (U

AE)

Pow

er T

rans

mis

sion

Net

wor

k (A

bu D

habi

)

Financial Statements

31 DECEMBER 2010

Abu Dhabi Transmission &Despatch Company PJSC


Report on the financial statements

We have audited the accompanying financial statements of Abu Dhabi Transmission & Despatch Company, PJSC (“the Company”), which comprise the statement of financial position as at 31 December 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the applicable provisions of the articles of association of the Company and the UAE Commercial Companies Law of 1984 (as amended), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDER OFABU DHABI TRANSMISSION & DESPATCH COMPANY PJSC


Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2010, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other legal and regulatory requirements

We also confirm that, in our opinion, the financial statements include in all material respects, the applicable requirements of the UAE Commercial Companies Law of 1984 (as amended) and the articles of association of the Company, proper books of account have been kept by the Company, an inventory was duly carried out and the contents of the report of the Board of Directors relating to these financial statements are consistent with the books of account. We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the UAE Commercial Companies Law of 1984 (as amended) or of the articles of association of the Company have occurred during the year which would have had a material effect on the business of the Company or on its financial position.

Signed byBassam HagePartnerErnst & YoungRegistration No. 258

12 April 2011Abu Dhabi


2010 2009 AED ‘000 AED ‘000

RevenuesService and connection charges for transmission of water and electricity to: Abu Dhabi Distribution Company and Al Ain Distribution Company 3,332,487 2,332,643 Federal Electricity and Water Authority 245,500 155,602 Sharjah Electricity and Water Authority 175,527 76,403 Others 268 268

3,753,782 2,564,916

Cost of sales Staff costs (281,309) (236,162) Repairs, maintenance and consumables used (107,102) (110,026) Depreciation (1,030,756) (917,740)

(1,419,167) (1,263,928)

Gross Profit 2,334,615 1,300,988

Provision for slow moving and obsolete inventories (15,595) (10,307)Administrative and other expenses (162,718) (181,398)Finance costs (167,058) (105,865)Other income 83,311 66,815

(262,060) (230,755)

Profit For The Year 2,072,555 1,070,233

Other comprehensive income - -

Total Comprehensive Income For The Year 2,072,555 1,070,233

Abu Dhabi Transmission & Despatch Company PJSCStatement Of Comprehensive IncomeFor the year ended 31 December 2010


2010 2009 AED ‘000 AED ‘000ASSETSNon current assetsProperty, plant and equipment 37,449,539 34,506,343Prepaid costs 772 9,150 37,450,311 34,515,493

Current assetsInventories 199,141 277,230Amounts due from related parties 11,548,687 8,686,721Prepayments and other assets 47,347 54,175Bank balances and cash 8,085 8,248

11,803,260 9,026,374

TOTAL ASSETS 49,253,571 43,541,867

EQUITY AND LIABILITIESEquityShare capital 5,991,417 5,991,417Proposed increase in share capital 2,112,978 2,107,191Proposed dividend 856,187 674,076Statutory reserve 758,512 551,256Legal reserve 758,512 551,256Retained earnings 1,658,043 856,187Government of Abu Dhabi account (11,447) (11,447)

12,124,202 10,719,936Loan from Abu Dhabi Water and Electricity Authority 21,428,063 22,984,537

Total equity 33,552,265 33,704,473

Non-current liabilitiesTerm loan from Abu Dhabi Water and Electricity Authority 8,561,916 1,273,570Employees’ end of service benefits 87,223 82,793Deferred income – grant 1,344,814 1,408,036Deferred income – connection fees 9,233 9,501Contractors’ payable and accruals 1,242,817 1,822,962 11,246,003 4,596,862

Current liabilitiesAccounts payable 436,003 744,443Amounts due to related parties 2,184,181 2,179,906

Abu Dhabi Transmission & Despatch Company PJSCStatement Of Financial PositionAs at 31 December 2010


Accruals 975,293 1,358,342Retentions payable 796,336 894,351Deferred income – grant 63,222 63,222Deferred income – connection fees 268 268

4,455,303 5,240,532

Total liabilities 15,701,306 9,837,394

TOTAL EQUITY AND LIABILITIES 49,253,571 43,541,867

Dr. Abdulla Al Suwaidi David A. Copestake CHAIRMAN MANAGING DIRECTOR


2010 2009 AED ‘000 AED ‘000

Operating ActivitiesProfit for the year 2,072,555 1,070,233Non- cash adjustments to reconcile profit for the year to net cash flows: Depreciation 1,030,756 917,740 Release of deferred income – grant (63,222) (63,222) Release of deferred income – connection fees (268) (268) Employees’ end of service benefits 9,949 5,422 Property, plant and equipment written off (net) 1,527 12,086Working capital adjustments: Inventories 7,440 9,147 Amounts due from related parties (3,536,042) (1,734,645) Prepayments and other assets 15,206 (10,518) Amounts due to related parties 4,275 48 Accounts payable, retentions and accruals (789,504) 304,521 Employees’ end of service benefits paid and transfers (6,215) (4,702)

Net cash flows (used in) from operating activities (1,253,543) 505,842

Investing ActivitiesPurchase of property, plant and equipment including additional advances paid during the year (3,904,134) (5,144,801)

Net cash flows used in investing activities (3,904,134) (5,144,801)

Financing ActivitiesTerm loan from Abu Dhabi Water and Electricity, net (363,877) (363,877)Proposed increase is share capital 5,787 -Contractors’ payable and accruals (580,145) (2,428,032)Loan from Abu Dhabi Water and Electricity Authority – equity, net 6,095,749 7,378,446

Net cash flows from financing activities 5,157,514 4,586,537

(Decrease) Increase In Cash And Cash Equivalents (163) (52,422)

Cash and cash equivalents at 1 January 8,248 60,670

Cash And Cash Equivalents At 31 December 8,085 8,248

Abu Dhabi Transmission & Despatch Company PJSCStatement Of Cash FlowsFor the year ended 31 December 2010


1 Activities

Abu Dhabi Transmission & Despatch Company PJSC (“the Company”) is a Private Joint Stock Company registered and incorporated in the United Arab Emirates (“UAE”) and is engaged in the transmission of water and electricity from the generation and desalination plants to the distribution networks in the Emirate of Abu Dhabi, Dubai Electricity and Water Authority, Federal Electricity and Water Authority and Sharjah Electricity and Water Authority.

The Company is a wholly owned subsidiary of Abu Dhabi Power Corporation which is a wholly owned subsidiary of Abu Dhabi Water and Electricity Authority (“the Authority” or “ADWEA”) which was established pursuant to the provisions of Law No. 2 of 1998, concerning the regulation of the Water and Electricity Sector. The Company is also governed by its Water and Electricity Transmission and Despatch license (“the license”) issued by the Regulation and Supervision Bureau.

The Company’s registered head office is at P.O. Box 173, Abu Dhabi, United Arab Emirates.

The financial statements of the Company for the year ended 31 December 2010 were authorised for issue in accordance with a resolution of the Board of Directors on 12 April 2011.

2.1 Basis Of Preparation

The financial statements have been prepared on a historical cost basis.

The financial statements have been presented in UAE Dirhams (“AED”), which is the functional currency of the Company. All values are rounded to the nearest thousand (AED ‘000) except when otherwise indicated.

Statement of complianceThe financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and applicable requirements of the UAE Commercial Companies Law of 1984 (as amended).

2.2 Changes In Accounting Policies And Disclosures

The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous financial year except as follows:

The Company has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2010.

• IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions effective 1 January 2010

• IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective 1 July 2009, including consequential amendments to IFRS 2, IFRS 5 IFRS 7, IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39

Abu Dhabi Transmission & Despatch Company PJSCNotes To The Financial StatementsAt 31 December 2010


• IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items effective 1 July 2009

• IFRIC 17 Distributions of Non-cash Assets to Owners effective 1 July 2009• IAS 24 Related Party Disclosures (Amendment) effective for annual periods beginning on or after 1

January 2011.• Improvements to IFRSs (May 2008)• Improvements to IFRSs (April 2009)

The adoption of the standards or interpretations is described below:

IFRS 2 Share-based Payment (Revised)

The IASB issued an amendment to IFRS 2 that clarified the scope and the accounting for group cash-settled share-based payment transactions. The Company adopted this amendment as of 1 January 2010. It did not have an impact on the financial position or performance of the Company.

IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended)

IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after becoming effective. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) affect acquisitions or loss of control of subsidiaries and transactions with non-controlling interests after 1 January 2010.

IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items

The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Company has concluded that the amendment will have no impact on the financial position or performance of the Company, as the Company has not entered into any such hedges.



IFRIC 17 Distribution of Non-cash Assets to Owners

This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The interpretation has no effect on either, the financial position nor performance of the Company.

Improvements to IFRSs

In May 2008 and April 2009, the IASB issued omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the group.

Issued in May 2008

• IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that when a subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even when the entity remains a non-controlling interest after the sale transaction. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.

Issued in April 2009

• IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in IFRS 5. The disclosure requirements of other IFRSs only apply if specifically required for such non-current assets or discontinued operations. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.

• IFRS 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.

• IAS 7 Statement of Cash Flows: States that only expenditure that results in recognising an asset can be classified as a cash flow from investing activities. This amendment will impact amongst others, the presentation in the statement of cash flows of the contingent consideration on the business combination completed in 2010 upon cash settlement.

• IAS 36 Impairment of Assets: The amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in IFRS 8 before aggregation for reporting purposes. The amendment has no impact on the Company as the annual impairment test is performed before aggregation.


Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Company:

Issued in April 2009

• IFRS 2 Share-based Payment• IAS 1 Presentation of Financial Statements• IAS 17 Leases• IAS 34 Interim Financial Reporting• IAS 38 Intangible Assets• IAS 39 Financial Instruments: Recognition and Measurement• IFRIC 9 Reassessment of Embedded Derivatives• IFRIC 16 Hedge of a Net Investment in a Foreign Operation.

The adoption of the above standards and interpretations did not have any material effect on the financial performance or position of the Company.

In addition to the above, the company has early adopted IAS 24 related party transactions (Amendment)

IAS 24 Related Party Disclosures (Amendment)

The amended standard is effective for annual periods beginning on or after 1 January 2011. However, the Company has chosen to adopt the requirements early, in its 2010 financial statements. The amendment clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government-related entities. The Company has concluded that the early adoption of the amendment did not have any significant impact on its financial position or performance.

2.3 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosures of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of inventoriesInventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation



is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the Company’s policy for inventory provisioning.

Impairment of property, plant and equipmentManagement determines whether there are any indications of impairment to the net carrying values of property, plant and equipment on an annual basis because of the difference between the duration of contracted cash flows and accounting depreciation of assets. This requires an estimation of the value in use of the cash generating units. Estimating the value in use requires the Company to make an estimate of the expected future cash flows and also choose a suitable discount rate in order to calculate the present value of those cash flows.

Useful lives of property, plant and equipmentManagement of the Company determines the estimated useful lives of its property, plant and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset or physical wear and tear. Management reviews the residual value and useful lives annually and the future depreciation charge would be adjusted where management believes that the useful lives differ from previous estimates.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Transmission use of system chargesRevenues comprise the transmission use of system charges from licensed and unlicensed activities. Revenue from licensed activities represents the system charges made to Abu Dhabi Distribution Company and Al Ain Distribution Company (wholly-owned subsidiaries of the Abu Dhabi Water and Electricity Authority) for the delivery of water and electricity from the generation and desalination plants to the distribution networks for the year. Revenue from unlicensed activities represents the system charges made to other Emirates.

Licensed activities and unlicensed activities from shared assetsRevenue for the transmission use of system charges is subject to the maximum allowed revenue and price control as regulated by the Regulation and Supervision Bureau (the “Bureau”) in accordance with the Company’s licence and certain correspondence relating to Price Control (PC) as agreed between the Company and the Bureau.

Revenue recognition continuedUnlicensed activities from solely dedicated assetsThe service charges for the transmission of water and electricity from solely dedicated assets are based on the specific transmission charge calculated with reference to the costs associated with the relevant dedicated assets.

In all cases, revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.


Connection fees Connection fee is recognised on a systematic basis over the term of the respective customer contracts unless it represents a separately identifiable service and satisfies other criteria for upfront recognition to the income statement.

Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Company as a lesseeFinance leases, which transfer to the Company substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement.

Leased assets are depreciated over the useful life of the asset. However if, there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

Company as a lessorLeases where the Company does not transfer substantially all the risks and benefits of ownership of the assets are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Property, plant and equipmentPlant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred.

Depreciation is provided on all property, plant and equipment, other than capital work in progress and is calculated on a straight line basis over the estimated useful life of the asset as follows:

Buildings over 10 - 39 years Plant and machinery (including plant spares) over 10 - 39 years

The cost of spare parts held as essential for the continuity of operations and which are designated as insurance spares is depreciated on a straight-line basis over the estimated remaining operating life of the plant and equipment to which they relate. Spare parts used for normal repairs and maintenance are



expensed when issued.

The asset’s residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively if appropriate.

Capital work in progressCapital work in progress is included in property, plant and equipment at cost, on the basis of the percentage completed at the statement of financial position date. The capital work in progress is transferred to the appropriate asset category and depreciated in accordance with the Company’s policies when construction of the asset is completed and the asset commissioned.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Borrowing costs

Borrowing costs that are directly attributable to the design, development, procurement and construction of each part of a plant up to the date when all activities necessary to prepare each part of the plant for its intended use are complete, are capitalised as part of capital work in progress. Borrowing costs in respect of completed parts of the plant are recognised as an expense in the period in which they are incurred.

Financial assets

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition.

Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way purchases) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.

The Company’s financial assets include bank balances and cash, amounts due from related parties and certain other assets.

The subsequent measurement of the Company’s financial assets, except for cash and cash equivalents, are carried at amortized cost.


Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

The Company assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). If a write-off is later recovered, the recovery is recognised in the income statement.

Financial liabilities

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognised initially at fair value and in the case of loans and borrowings fair value of the consideration received less directly attributable transaction costs.

The Company’s financial liabilities include term loan from ADWEA, accounts payable, accruals, retentions payable, amounts due to related parties and certain other liabilities.

Loans and borrowingsAfter initial recognition, financial liabilities of the Company are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Fair value of financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the statement of financial position date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.



InventoriesInventories are stated at the lower of cost, determined on the basis of weighted average costs, and net realisable value. Cost are those expenses incurred in bringing each item to its present location and condition.

Net realisable value is based on replacement cost.

Cash and cash equivalents

For the purpose of the Cash Flow Statement, cash and cash equivalents consist of cash in hand and bank balances.

Accounts payable and accrualsLiabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed by the supplier or not.

Provisions

Provisions are recognised when the Company has present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Employees’ end of service benefitsThe Company provides end of service benefits to its expatriate employees. The entitlement to these benefits is based upon the employees’ final salary and length of service subject to completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.

With respect to its national employees, the Company makes contribution to Abu Dhabi Retirement Pensions and Benefits calculated as a percentage of the employees’ salaries. The Company’s obligations are limited to these contributions, which are expensed when due.

Deferred income - grant

Deferred income represents the value of property, plant and equipment received as a grant and is recognised as income over the period necessary to match them with the related costs of property, plant and equipment which they are intended to compensate, on a systematic basis.

Foreign currenciesTransactions in foreign currencies are recorded at the rate ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the statement of financial position date. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.


2.5 FUTURE CHANGES IN ACCOUNTING POLICIES - STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below.

• IAS 32 Financial Instruments: Presentation – Classification of Rights Issues (Amendment) effective for annual periods beginning on or after 1 February 2010.

• IFRS 9 Financial Instruments: Classification and Measurement effective for annual periods beginning on or after 1 January 2013

• IFRIC 14 Prepayments of a minimum funding requirement (Amendment) effective for annual periods beginning on or after 1 January 2011.

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective for annual periods beginning on or after 1 July 2010.

• Improvements to IFRSs (issued in May 2010)

Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective.

IAS 32 Financial Instruments: Presentation – Classification of Rights Issues (Amendment)

The amendment to IAS 32 is effective for annual periods beginning on or after 1 February 2010 and amended the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. This amendment will have no impact on the Company after initial application.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and derecognition. The completion of this project is expected in early 2011. The adoption of the first phase of IFRS 9 will have no effect on the classification and measurement of the Company’s financial assets.

IFRIC 14 Prepayments of a minimum funding requirement (Amendment)

The amendment to IFRIC 14 is effective for annual periods beginning on or after 1 January 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The amendment is deemed to have no impact on the financial statements of the Company.



IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The adoption of this interpretation will have no effect on the financial statements of the Company.

Improvements to IFRSs (issued in May 2010)

The IASB issued Improvements to IFRSs, an omnibus of amendments to its IFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either 1 July 2010 or 1 January 2011. The amendments listed below, are considered to have a reasonable possible impact on the Company:

• IFRS 7 Financial Instruments: Disclosures• IAS 1 Presentation of Financial Statements• IAS 27 Consolidated and Separate Financial Statements

The Company, however, expects no impact from the adoption of the amendments on its financial position or performance.

2010 Annual Report - English

Documents