EXHIBIT 99(d)
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED FINANCIAL STATEMENTS -- 30 JUNE 2004
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED FINANCIAL STATEMENTS - 30 JUNE 2004
CONTENTS PAGE NO.
Consolidated Statements of Financial Performance 1
Consolidated Statements of Financial Position 2
Consolidated Statements of Cash Flows 3
Notes to and forming part of the Consolidated Financial Statements 4-28
Director's Declaration 29
Report of Independent Registered Public Accounting Firm 30
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED STATEMENTS OF FINANCIAL PERFORMANCE
FOR THE YEARS ENDED 30 JUNE 2004, 2003 AND 2002
UNAUDITED UNAUDITED
2004 2003 2002
NOTES $ $ $
Revenues from ordinary activities 2 89,263,588 85,096,603 77,985,859
Depreciation and amortisation expenses 2 (14,089,846) (13,386,389) (11,707,716)
Borrowing costs expense 2 (19,105,045) (19,871,074) (20,386,940)
Other expense from ordinary activities 2 (15,053,684) (12,277,911) (10,381,549)
----------- ----------- -----------
Total expenses (48,248,575) (45,535,374) (42,476,205)
PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME
TAX EXPENSE 41,015,013 39,561,229 35,509,654
Income tax benefit/(expense) relating to
ordinary activities 4 29,857,580 (12,921,291) (11,641,592)
----------- ----------- -----------
PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME
TAX EXPENSE 70,872,593 26,639,938 23,868,062
=========== =========== ===========
TOTAL REVENUES, EXPENSES AND VALUATION
ADJUSTMENTS RECOGNISED DIRECTLY IN EQUITY
0 0 0
=========== ============ ===========
TOTAL CHANGES IN EQUITY OTHER THAN THOSE
RESULTING FROM TRANSACTIONS WITH OWNERS AS
OWNERS 70,872,593 26,639,938 23,868,062
=========== ============ ===========
The above Statements of Financial Performance should be read in conjunction with
the accompanying notes.
1
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2004 AND 2003
UNAUDITED
2004 2003
NOTES $ $
CURRENT ASSETS
Cash assets 5 41,490,431 62,995,655
Receivables 6 60,722,616 9,192,352
Inventories 7 2,300,750 2,079,874
Other 8 917,869 827,630
----------- -----------
TOTAL CURRENT ASSETS 105,431,666 75,095,511
----------- -----------
NON-CURRENT ASSETS
Other 8 1,474,836 1,380,479
Property, plant and equipment 9 402,020,161 402,937,164
Intangible assets 10 103,701,270 106,697,181
----------- -----------
TOTAL NON-CURRENT ASSETS 507,196,267 511,014,824
----------- -----------
TOTAL ASSETS 612,627,933 586,110,335
----------- -----------
CURRENT LIABILITIES
Payables 11 5,889,685 4,656,804
Interest-bearing liabilities 12 25,415,600 15,524,800
Tax liabilities 2,974,036 0
Other liabilities 14 34,016,948 20,282,506
----------- -----------
TOTAL CURRENT LIABILITIES 68,296,269 40,464,110
----------- -----------
NON CURRENT LIABILITIES
Interest-bearing liabilities 12 224,984,400 250,400,000
Deferred tax liabilities 13 14,412,364 47,243,980
----------- -----------
TOTAL NON CURRENT LIABILITIES 239,396,764 297,643,980
----------- -----------
TOTAL LIABILITIES 307,693,033 338,108,090
----------- -----------
----------- -----------
NET ASSETS 304,934,900 248,002,245
=========== ===========
EQUITY
Contributed equity 15 240,662,307 240,662,307
Retained profits 16 64,272,593 7,339,938
----------- -----------
TOTAL EQUITY 304,934,900 248,002,245
=========== ===========
TOTAL LIABILITIES AND EQUITY 612,627,933 586,110,335
=========== ===========
The above Statements of Financial Position should be read in conjunction with
the accompanying notes
2
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 30 JUNE 2004, 2003 AND 2002
UNAUDITED UNAUDITED
2004 2003 2002
NOTES $ $ $
CASH FLOW FROM OPERATING ACTIVITIES
Receipts from customers 110,165,868 105,038,892 92,530,910
Payments to suppliers (17,821,869) (13,744,859) (12,329,122)
GST paid (8,043,830) (7,463,827) (7,064,203)
Interest received 3,016,055 2,516,498 1,394,736
Interest and other finance costs paid (18,233,328) (19,239,854) (19,634,606)
Income tax paid (PAYG) (117,407) 0 0
----------- ----------- ----------
Net cash flows from operating activities 17(b) 68,965,489 67,106,850 54,897,715
----------- ----------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Payment for property, plant and equipment
Purchase of commercial bills (11,005,975) (1,870,080) (2,369,285)
Proceeds from sale of property, plant and (50,000,000) 0 0
equipment 0 88 1,429
----------- ----------- ----------
Net cash flows used in investing activities (61,005,975) (1,869,992) (2,367,856)
----------- ----------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of borrowings (15,524,800) (16,025,600) (12,895,600)
Dividends paid (13,939,938) (25,868,062) (23,222,508)
----------- ----------- ----------
Net cash used in financing activities (29,464,738) (41,893,662) (36,118,108)
----------- ----------- ----------
Net (decrease)/increase in cash held (21,505,224) 23,343,196 16,411,750
Cash at beginning of the financial year 62,995,655 39,652,459 23,240,709
----------- ----------- ----------
CASH AT END OF THE FINANCIAL YEAR 17(a) 41,490,431 62,995,655 39,652,459
=========== =========== ===========
The above Statements of Cash Flows should be read in conjunction with the
accompanying notes
3
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004
30 JUNE 2003 AND 2002 (UNAUDITED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated general purpose financial statements cover
the year from 1 July 2003 to 30 June 2004. These consolidated
financial statements been prepared in accordance with the
requirements of applicable Australian Accounting Standards with
the exception of the presentation of Parent company financial
statements. Other mandatory professional reporting requirements
in Australia (Urgent Issues Group Consensus Views) have also
been complied with. These consolidated financial statements have
been prepared to fulfil CMS Energy Corporation's, a former
shareholder, financial reporting requirements in United States
of America ("USA").
The financial statements are presented in Australian Dollars and
prepared on an accruals basis in accordance with the historical
cost convention.
The following is a summary of the material accounting policies
adopted in preparation of the financial statements.
(a) Principles of consolidation
The consolidated financial statements comprise the financial
statements of SCP Investments (No. 1) Pty Ltd ("the company")
and all the entities it controlled during the year and at
balance date, together referred to as the "consolidated entity".
Information from the financial statements of subsidiaries is
included from the date the parent company obtains control until
such time that control ceases. Where there is loss of control of
a subsidiary, the consolidated financial statements include the
results for the part of the reporting period during which the
parent company has control.
Subsidiary acquisitions are accounted for using the purchase
method of accounting.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent company, using consistent
accounting policies. Adjustments are made to bring into line any
dissimilar accounting policies that may exist. All inter-company
balances and transactions, including unrealised profits arising
from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be
recovered.
(b) Taxes
Income Taxes
The consolidated entity adopts the liability method of
tax-effect accounting whereby the income tax expense shown in
the Statement of Financial Performance is based on the operating
profit before income tax adjusted for any permanent differences.
Goods and Services Tax
Revenues, expense and assets are recognised net of the amount of
GST except:
o Where the GST incurred on a purchase of goods or
services is not recoverable from the taxation
authority, in which case the GST is recognised as part
of the cost of the acquisition of the asset or as part
of the expense items as applicable and;
o Receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to the
taxation authority is included as part as receivables or
payables in the Statement of Financial Position. Cash flows are
included in the Statement of Cash Flows on a gross basis and the
GST component of the cash flows arising from investing and
financial activities, which are recoverable from, or payable to,
the taxation authority, are classified as operating cash flows.
Commitments ands contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
4
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
(c) Inventories
Inventories are measured at the lower of cost and net realisable
value. Costs are assigned on a weighted average basis.
(d) Receivables
Trade receivables are recognised and carried at original invoice
amount less a provision for any uncollectible debts. An estimate
for doubtful debts is made when collection of the full amount is
no longer probable. Bad debts are written off as incurred.
Receivables from related parties are recognised and carried at
the nominal amount due.
Bills of exchange and promissory notes are measured at the lower
of cost and net realisable value.
(e) Property, plant and equipment
Property, plant and equipment are brought to account at cost,
less where applicable accumulated depreciation or amortisation.
The carrying amount of property, plant and equipment has been
reviewed by directors to ensure that it is not in excess of the
recoverable amount of those assets.
Property, Plant and equipment, excluding freehold land, are
depreciated over their useful economic lives as follows:
LIFE METHOD
Buildings and fixtures 10 - 40 Straight Line
Plant and equipment 2.5 - 25 Straight Line
Pipeline Units of throughput
(f) Intangibles
The valuation of the licence to operate the Goldfields Gas
Transmission Pipeline is initially recorded at fair value at the
date of acquisition.
The amount will provide a benefit for more than one financial
year and is therefore deferred and amortised on a straight-line
basis over the period of expected benefits currently being 40
years. The un-amortised balance is reviewed each balance date
and charged to expenses to the extent that future benefits are
no longer probable.
(g) Interest in Joint Ventures
Interest in joint venture operations are brought to account by
including in the respective financial statement categories:
o the consolidated entity's share of each of the
individual assets employed in the joint venture;
o liabilities incurred by the consolidated entity in
relation to the joint venture including the entities
share of any liabilities for which the entity is
jointly and/or severally liable; and
o the consolidated entity's share of expenses of the
joint venture.
(h) Cash
For the purposes of the statement of cash flows, cash includes
cash on hand and at call deposits with banks or financial
institutions, investments in money market instruments maturing
within less than two months and is net of bank overdrafts.
5
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
(i) Prepaid finance fees
Finance fees relating to the consolidated entity's borrowings
have been deferred. These costs are being amortised over the
life of the borrowings being seven years.
(j) Recoverable Amounts of Non-Current Assets
All non-current assets are reviewed at least annually to
determine whether their carrying amounts require write down to
recoverable amount. Recoverable amount is determined using
undiscounted cash flows.
(k) Interest bearing liabilities
All loans are measured at the principal amount. Interest is
charged as an expense as it accrues.
(l) Derivative financial instruments
Interest rate swaps
The consolidated entity has entered into interest rate swap
agreements that are used to convert the variable rate of its
medium-term borrowings into long--term fixed interest rates. The
swaps are entered into with the objective of reducing the risk
of rising interest rates.
It is the consolidated entity's policy not to recognise the
interest rate swaps in the financial statements as these are
specific hedges. Net receipts and payments are recognised as an
adjustment to interest expense.
(m) Provisions
Dividends payable are recognised when a legal obligation to pay
the dividend arises, typically following approval of the
dividend at the meeting of shareholders.
6
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
(n) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the entity and the revenue can be
reliably measured. The following specific recognition criteria
must also be met before revenue is recognised.
Rendering of Services
Where the contract outcome can be reliably measured - control of
a right to be compensated for the services has been attained and
the stage of completion can be reliably measured (refer note 3).
Interest
Control of a right to receive consideration for the provision
of, or investment in, assets has been attained.
Dividends
Control of a right to receive consideration for the investment
in assets is attained, usually evidenced by approval of the
dividend at a meeting of shareholders.
(o) Changes in Accounting Policies
The accounting policies adopted are consistent with those of the
previous year.
Comparatives
Where necessary, comparatives have been reclassified and
repositioned for consistency with current year disclosure.
(p) Contributed Equity
Issued and paid up capital is recognised at the fair value of
the consideration received by the company.
Any transaction costs arising on the issue of ordinary shares
are recognised directly in equity as a reduction of the share
proceeds received.
(q) Leases
Leases are classified at their inception as either operating or
finance leases based on the economic substance of the agreement
so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor
effectively retains substantially all of the risks and benefits
of ownership of the leased item, are recognised as an expense on
a straight-line basis.
The consolidated entity does not have any finance leases.
7
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
2 REVENUE AND EXPENSE ITEMS
UNAUDITED UNAUDITED
2004 2003 2002
$ $ $
Profit from ordinary activities has been determined after:
REVENUES FROM ORDINARY ACTIVITIES:
REVENUES FROM OPERATING ACTIVITIES
Revenues from services rendered (Note 3) 85,257,236 82,581,902 76,589,694
---------- ---------- ----------
Total revenues from operating activities 85,257,236 82,581,902 76,589,694
---------- ---------- ----------
REVENUES FROM NON OPERATING ACTIVITIES
Interest from third parties 4,006,352 2,514,613 1,394,736
Proceeds from the sale of non-current assets 0 88 1,429
---------- ---------- ----------
Total revenues from outside the operating activities
4,006,352 2,514,701 1,396,165
---------- ---------- ----------
Total revenues from ordinary activities 89,263,588 85,096,603 77,985,859
========== ========== ==========
DEPRECIATION AND AMORTISATION EXPENSES:
Depreciation of plant and equipment 10,053,765 9,155,791 7,882,012
Depreciation of buildings and fixtures 1,040,167 1,234,684 1,013,063
Amortisation of pipeline licence 2,995,914 2,995,914 2,812,641
---------- ---------- ----------
Total depreciation and amortisation expensed 14,089,846 13,386,389 11,707,716
========== ========== ==========
BORROWING COSTS EXPENSE:
Interest to third parties 18,340,979 19,108,456 19,616,284
Borrowing costs 73,826 72,378 80,416
Amortisation of prepaid finance fees 690,240 690,240 690,240
---------- ---------- ----------
Total borrowing costs expensed 19,105,045 19,871,074 20,386,940
========== ========== ==========
OTHER EXPENSES FROM ORDINARY ACTIVITIES INCLUDES:
Bad & doubtful debts recovered
Remuneration of the auditors for auditing and 0 (1,000) (48,545)
reviewing accounts
Remuneration of the auditors for other services -- tax 28,479 34,825 21,818
advisory
Written down value of disposed PP&E (i) 240,080 48,956 92,361
Pipeline operations costs 271,689 45,607 12,316
Operating lease rentals 13,292,716 11,604,064 9,965,520
Other - Administrative 260,025 240,156 222,187
960,695 305,303 115,892
---------- ---------- ----------
Total other expenses 15,053,684 12,277,911 10,381,549
========== ========== ==========
(i) Net losses on disposal of PP&E 271,689 45,519 10,887
(proceeds: nil)
8
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
3 OPERATING REVENUE
Revenue from ordinary activities has been derived from gas
transmission. The consolidated entity defers revenue where there
are disputes with customers over charged amounts and the
Directors are willing to negotiate an amount, which can be
reliably estimated. See Note 14.
4 INCOME TAX EXPENSE
UNAUDITED UNAUDITED
2004 2003 2002
$ $ $
The prima facie tax payable on operating profit is
reconciled to the income tax provided in the accounts as follows:
Operating Profit 41,015,013 39,561,229 35,509,654
Prima facie tax payable on operating profit at 30%
(2003: 30%, 2002:30%) 12,304,504 11,868,369 10,652,896
Add: Tax effect of permanent and other differences:
- non deductible depreciation & amortisation 1,210,824 1,052,568 988,207
- other 0 354 489
- under provision of previous year 952,105 0 0
- recognition of tax benefit upon entry to tax
consolidation and resetting tax values (44,325,013) 0 0
----------- ---------- ----------
Income tax (benefit)/expense attributable to operating
profit (29,857,580) 12,921,291 11,641,592
=========== ========== ==========
Franking credit balance:
Franking credits available for subsequent financial
years based on a tax rate of 30% (2003: 30%,
2002:30%) 0 0 0
=========== ========== ==========
Tax Consolidation
Effective 1 July 2003, for the purposes of income taxation, The
company and its 100% owned subsidiaries have elected to form a
tax consolidated group. The head entity of the tax consolidated
group is SCP Investments (No. 1) Pty Ltd. All members of the
group are entering into tax sharing and funding arrangement in
order to allocate income tax expense to each wholly owned
subsidiary on a stand alone tax effect basis. In addition the
agreement is to provide for the allocation of income tax
liabilities between the entities should the head entity default
on its payment obligations. At balance date, the possibility of
default is remote.
5 CASH ASSETS
UNAUDITED
2004 2003
$ $
Cash on hand 506 537
Cash at bank -- GGT JV a/c 530,038 1,413,735
Proceeds accounts -- ANZ (i) 40,959,887 61,581,383
----------- ----------
Total cash assets 41,490,431 62,995,655
=========== ==========
(i) Under the loan facility agreement, cash in the proceeds
account would be restricted in the event of a breach of
debt covenants relating to coverage of bank loan interest
and principal repayments No breaches have occurred to date.
9
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
6 RECEIVABLES
UNAUDITED
2004 2003
$ $
Trade debtors (i) 9,455,381 9,285,979
Provision for doubtful debts (542,570) (542,570)
----------- ---------
Trade debtors, net 8,912,811 8,743,409
Commercial bills (ii) 50,990,297 0
Sundry other debtors (iii) 482,118 74,113
GST receivable 337,390 374,830
----------- ---------
Total receivables 60,722,616 9,192,352
=========== =========
(i) Trade debtors are non-interest bearing and are on terms of
either 7 or 14 days.
(ii) The Commercial Bills have an average maturity of 70 days
and have a fixed yield which has averaged 5.44%.
(iii) Sundry debtors and other receivables are non-interest
bearing and generally on 30 day terms.
7 INVENTORIES
Share of GGTJV stores & spares (i) 1,355,912 1,155,980
Gas in pipeline 944,838 923,894
----------- ---------
Total inventories 2,300,750 2,079,874
=========== =========
(i) Stores and spares are held ready for use for planned and
unplanned pipeline repairs, which do not extend the
useful life of the pipeline. The Company's policy is to
expense as incurred the stores and spares as they are
consumed.
8 OTHER
CURRENT
Prepayments -- general 213,831 116,144
Prepayments -- finance fees 690,240 690,240
Prepayments -- insurance 13,798 15,760
Prepayments -- GGTJV operating costs 0 5,486
----------- ---------
Total other current 917,869 827,630
=========== =========
NON CURRENT
Prepayments -- finance fees 690,239 1,380,479
Mobilisation advance paid to APT Pipelines (WA)
Pty Ltd 784,597 0
----------- ---------
Total other non current 1,474,836 1,380,479
=========== =========
10
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
9 PROPERTY, PLANT AND EQUIPMENT
UNAUDITED
2004 2003
$ $
(a) Buildings & fixtures, at cost 34,634,605 27,998,965
Less accumulated depreciation (5,955,961) (4,915,794)
----------- -----------
28,678,644 23,083,171
----------- -----------
Plant and equipment, at cost 419,081,861 414,895,350
Less accumulated depreciation (46,192,639) (36,352,209)
----------- -----------
372,889,222 378,543,141
----------- -----------
Construction in progress, at cost 452,295 1,310,852
----------- -----------
Total Property, plant and equipment (i) 402,020,161 402,937,164
=========== ===========
(i) Included in the balances of Plant and Equipment are the
consolidated entity's share of the Goldfields Gas
Transmission Joint Venture assets and rights (refer note
18) which are pledged as security for the bank loan (refer
note 12).
(b) RECONCILIATIONS
Reconciliations of the carrying amounts of property, plant and
equipment at the beginning and end of the financial year (ii):
Buildings & fixtures
Carrying amount at beginning 23,083,171
Transfers from construction in progress 6,641,408
Additions 180
Disposals (5,948)
Depreciation Expense (1,040,167)
-----------
28,678,644
===========
Plant & equipment
Carrying amount at beginning 378,543,141
Transfers from construction in progress 4,130,656
Additions 748,447
Disposals (479,257)
Depreciation Expense (10,053,765)
-----------
372,889,222
===========
Construction in progress
Carrying amount at beginning 1,310,852
Additions 9,913,507
Transfers to completed assets (10,772,064)
-----------
452,295
===========
(ii) Prior year comparatives are not required
11
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
10 INTANGIBLE ASSETS
UNAUDITED
2004 2003
$ $
Pipeline licence, at cost 119,836,557 119,836,557
Less accumulated amortisation (16,135,287) (13,139,376)
----------- -----------
Total intangible assets 103,701,270 106,697,181
=========== ===========
11 PAYABLES
Trade creditors, unsecured (i) 3,200,275 821,718
Sundry creditors, unsecured (ii) 2,689,410 3,835,086
----------- -----------
Total payables 5,889,685 4,656,804
=========== ===========
Included in the above payables, aggregate
amounts payable to related parties:
- CMS Gas Transmission of Australia 22 23,953 0
- additional related companies 22 2,714,140 571,606
----------- -----------
2,738,093 571,606
=========== ===========
(i) Trade creditors are non-interest bearing and are normally
settled on 30 day terms.
(ii) Sundry creditors are non-interest bearing and have terms
ranging for 21 to 90 days.
12 INTEREST-BEARING LIABILITIES
CURRENT
Bank loan, secured (i) 25,415,600 15,524,800
=========== ===========
NON-CURRENT
Bank loan, secured (i) 224,984,400 250,400,000
=========== ===========
(i) The bank loan is secured, in general, by a charge over the
consolidated entity's share of the Goldfields Gas
Transmission Joint Venture assets and rights (refer note
18). Borrowings are repayable quarterly with the final
installment due 24 June 2006 and are at floating interest
rates.
12
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
13 DEFERRED TAX LIABILITIES
UNAUDITED
2004 2003
$ $
Attributable to timing differences 14,412,364 63,790,141
Provision for deferred income tax liabilities
offset by carry forward tax losses 0 (16,546,161)
---------- -----------
Deferred tax liabilities (net) 14,412,364 47,243,980
========== ===========
14 OTHER LIABILITIES
Deferred revenue (refer note 3) 34,016,948 20,282,506
========== ===========
15 CONTRIBUTED EQUITY
UNAUDITED UNAUDITED
2004 2003 2002
$ $ $
ORDINARY SHARES, FULLY PAID (i) 240,662,307 240,662,307 240,662,307
=========== =========== ===========
2004 2003 2002
# # #
Movements in contributed equity for the year:
On issue at start 553,662,307 553,662,307 553,662,307
Issued during the year 0 0 0
----------- ----------- -----------
On issue at end 553,662,307 553,662,307 553,662,307
=========== =========== ===========
(i) Ordinary shares have the right to received dividends as
declared and, in the event of winding up the company, to
participate in the proceeds form the sale of all surplus
assets in proportion to the number of shares held. Under
the terms of the Shareholders Agreement both shareholders
are entitled to equal voting rights at a meeting of the
company regardless of the actual proportion of shares held.
13
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
16 RETAINED PROFITS
UNAUDITED UNAUDITED
2004 2003 2002
$ $ $
Balance at the beginning of the financial year 7,339,938 0 0
Net profit attributable to members of the parent entity 70,872,593 26,639,938 23,868,062
Adjustment arising from adoption of AASB 1044
"Provisions, Contingent Liabilities and
Contingent Assets" 0 6,568,062 0
Dividends provided for or paid (13,939,938) (25,868,062) (23,868,062)
----------- ----------- -----------
Balance at the end of the financial year 64,272,593 7,339,938 0
=========== =========== ===========
Dividends proposed and not recognised as a liability 64,272,000 7,339,938 0
=========== =========== ===========
17 NOTES TO THE STATEMENT OF CASH FLOWS
(a) RECONCILIATION OF CASH
Cash at the end of the financial year as shown in the Statement
of Cash Flows is reconciled to the related items in the balance
sheet as follows:
UNAUDITED
2004 2003
$ $
Cash on hand 506 537
Cash at bank -- GGT JV a/c 530,038 1,413,735
Proceeds account -- ANZ 40,959,887 61,581,383
----------- ----------
Total cash & equivalents 41,490,431 62,995,655
=========== ==========
14
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
17 NOTES TO THE STATEMENT OF CASH FLOWS (CONT.)
UNAUDITED UNAUDITED
2004 2003 2002
$ $ $
(b) RECONCILIATION OF CASH FLOW FROM OPERATIONS WITH OPERATING
PROFIT AFTER INCOME TAX
Operating profit after income tax 70,872,593 26,639,938 23,868,062
Non-Cash Flows in Operating Profit
- Depreciation 11,093,932 10,390,475 8,895,074
- Amortisation 3,686,154 3,686,154 3,502,881
- Net (profit)/loss on disposal of assets 271,689 45,607 12,316
Changes in Assets and liabilities
- (Increase) in trade debtors (169,402) (1,452,603) (353,830)
- (Increase)/Decrease in other debtors (1,155,162) (164,241) 381,663
- Decrease in dividends receivable 0 0 0
- Decrease in prepayments 600,001 1,171,348 2,934,512
- Decrease in insurance claims 0 101,774 0
- (Increase)/Decrease in inventories (220,876) 112,258 (95,699)
- Increase/(Decrease) in creditors and accruals 109,698 570,120 (2,786,703)
- (Decrease) in provisions 0 (239,967) (60,033)
- Increase/(Decrease) in deferred revenue 13,734,442 13,324,696 6,957,880
- Increase/(Decrease) in deferred income tax (32,831,616) 12,921,291 11,641,592
- Increase in tax liabilities 2,974,036 0 0
----------- ---------- ----------
Cash flow from operations 68,965,489 67,106,850 54,897,715
=========== ========== ==========
(c) FINANCING FACILITIES AVAILABLE
At reporting date the following financing facilities had been
negotiated and were available:
Total facilities;
Bank loans 250,400,000 265,924,800
Facilities used at reporting date;
Bank loans 250,400,000 265,924,800
Facilities unused at reporting date;
Bank loans 0 0
15
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
18 INTERESTS IN JOINT VENTURES
UNAUDITED
2004 2003
$ $
The consolidated entity, through its controlled entities, has an
88.157% interest in the Goldfields Gas Transmission Joint
Venture, whose principal activity is the operation of the
Goldfields Gas Transmission Pipeline.
The consolidated entity's share of assets employed in the joint
venture is:
CURRENT ASSETS
Cash on hand 440 440
Cash at bank 530,038 1,413,735
Debtors 3,351,844 1,075,398
Inventory 1,355,913 1,155,980
Insurance claims 0 0
Prepayments 998,429 121,631
----------- -----------
Total current assets 6,236,664 3,767,184
----------- -----------
NON-CURRENT ASSETS
Construction in progress 444,388 1,302,945
Property, plant and equipment 419,979,404 409,084,022
----------- -----------
Total non-current assets 420,423,792 410,386,967
----------- -----------
TOTAL ASSETS 426,660,456 414,154,152
----------- -----------
CURRENT LIABILITIES
Trade creditors, unsecured 3,133,093 744,643
Sundry creditors, unsecured 272,666 101,252
----------- -----------
Total current liabilities 3,405,759 845,895
----------- -----------
NET ASSETS 423,254,697 413,308,257
=========== ===========
16
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
18 INTERESTS IN JOINT VENTURES (CONTINUED)
UNAUDITED
2004 2003
$ $
The consolidated entity's share of commitments made by the joint
venture is:
(a) CAPITAL EXPENDITURE CONTRACTED FOR IS PAYABLE AS
FOLLOWS:
Not later than one year 160,413 9,736,949
=========== ===========
(b) NON-CANCELLABLE OPERATING LEASE EXPENDITURE CONTRACTED
FOR IS PAYABLE AS FOLLOWS:
Not later than 1 year 329,435 134,060
Later than 1 year and not later than 5 years 363,695 275,064
Later than 5 years 1,149,316 675,588
----------- -----------
1,842,446 1,084,712
=========== ===========
(c) OPERATING EXPENDITURE COMMITMENTS RELATING TO THE
PIPELINE OPERATING AGREEMENT
Not later than 1 year 924,006 900,977
Later than 1 year and not later than 5 years 0 0
Later than 5 years 0 0
----------- -----------
924,006 900,977
=========== ===========
(d) OPERATING EXPENDITURE COMMITMENTS RELATING TO THE CMS
COMMERCIAL SERVICES AGREEMENT
Not later than 1 year 1,033,412 979,167
Later than 1 year and not later than 5 years 0 0
Later than 5 years 0 0
----------- -----------
1,033,412 979,167
=========== ===========
19 TARIFFS FOR GAS TRANSPORTATION
The Goldfields Gas Pipeline ("GGP") operates under a State
Agreement that was put in place in 1994, before the pipeline was
built in 1996 and pipeline tariffs are currently published
pursuant to the State Agreement. The GGP was deemed covered by
the Third Party Access Code for Natural Gas Pipeline System
("the Code") in 1998. Pursuant to the Code, GGT submitted its
access arrangements in December 1999. On the 10 April 2001, a
draft decision was issued by the WA Office of Gas Access
Regulation ("OffGAR") that, if it had been approved in its
published form, would have required Goldfields Gas Transmission
("GGT") to make amendments to reduce the proposed tariffs for
gas transportation and the terms for access to the GGP that
would apply to future gas sales.
In late 2002, the Economic Regulatory Authority ("ERA"), (which
superseded OffGAR), conceded that there were errors of law in
the GGT draft decision and embarked on a further round of
consultation prior to publishing an amended draft decision. The
amended draft decision was published by the ERA on 29 July 2004
with a public submission period out to 10 September 2004.
However the process going forward is that the application of the
tariffs is via an "Approved Access Arrangement" which follows a
final decision from the regulator but in any event is not
retrospective and applies only to new customers (unless
otherwise contractually stipulated) from the date of approval
onwards.
17
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
19 TARIFFS FOR GAS TRANSPORTATION (CONT)
GGT separately made an application on 26 March 2003 to the
National Competition Council ("NCC") for revocation of coverage
of the GGP from the Code. The NCC is required to make a
recommendation to the WA Minister of Energy who has the final
decision on whether to revoke coverage of the Code or not. The
NCC recommendation to the Minister, made in November 2003, was
to not revoke coverage. On 2 July 2004, the Minister agreed with
the NCC recommendation not to revoke coverage of the GGP from
under the code. GGT has lodged an appeal of this decision to the
Gas Review Board.
At this date the outcome of this matter is uncertain. Management
have obtained legal advice that confirms that this potential
issue would not have an impact on revenues recognised to date.
20 SEGMENT INFORMATION
The consolidated entity operates solely in the gas pipeline
industry and geographically operates only in Western Australia.
Revenues and expense are reported internally on a whole of
pipeline basis.
21 DIRECTORS DISCLOSURES
(a) DIRECTORS
The directors of SCP Investments (No. 1) Pty Ltd during the
financial year were:
W J Haener (appointed 29/09/98, resigned 21/08/03)
M J McCormack (appointed 10/08/00)
J M McDonald (appointed 10/08/00)
M Daneshvar (appointed 30/01/01, resigned 24/11/03)
T L Miller (appointed 21/08/03, resigned 17/8/04)
D A King (appointed 16/12/03, resigned 17/8/04)
(b) DIRECTORS REMUNERATION
2004 2003 2002
$ $ $
Income paid or payable, or otherwise made available, in
respect of the financial year, to all directors directly or
indirectly, by the entities of which they are
directors or any related party (i) 0 0 0
=========== =========== ==========
(i) The Directors of SCP Investments (No. 1) Pty Ltd are
employees of the shareholders of SCP Investments (No. 1)
Pty Ltd and do not receive any income in relation to
their role as directors of SCP Investments (No. 1) Pty
Ltd.
18
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
22 RELATED PARTIES
INTEREST IN SUBSIDIARIES
The following are wholly owned subsidiaries of SCP Investments (No. 1) Pty
Ltd. All are incorporated in Australia and have 30 June year ends.
SCP Investments (No. 2) Pty Limited the parent entity of Southern Cross
Pipelines Australia Pty Ltd
SCP Investments (No. 3) Pty Limited, the parent entity of Southern Cross
Pipelines (NPL) Australia Pty Ltd
Goldfields Gas Transmission Pty Ltd
ULTIMATE PARENT
Australian Pipeline Trust owns 55% and CMS Goldfields Gas Transmission
Australia Pty Ltd owns 45% of SCP Investments (No. 1) Pty Ltd. However,
both of these entities have equal board representation and voting rights in
SCP Investments (No. 1) Pty Ltd. Subsequent to year end Australian Pipeline
Trust acquired the remaining interest in the consolidated entity such that
they now own 100% of the consolidated entity.
CMS Goldfields Gas Transmission Australia Pty Ltd is a wholly owned
subsidiary of CMS Energy Corporation, an entity listed on a stock exchange
in the USA. Australian Gas Light Company ("AGL"), a company listed on the
Australian stock exchange, owns 30% of Australian Pipeline Trust.
OTHER RELATED PARTY TRANSACTIONS OF THE CONSOLIDATED ENTITY
Purchases
Purchases of services from CMS Gas Transmission of Australia, a wholly
owned subsidiary of CMS Energy Corporation, made under normal terms and
conditions for the period aggregated $295,653 (2003:$295,864,
2002:$256,615) of the consolidated entity's purchases. At reporting date
$23,953 (2003:$0) remained payable, forming part of the balance of trade
creditors.
Purchases of pipeline operating and maintenance costs from APT Pipelines
(WA) Pty Ltd, a company controlled by AGL, made under normal terms and
conditions for the period aggregated $8,875,705 (2003:$6,859,118,
2002:$6,286,240) including management fees of $710,246 (2003:$926,754,
2002:$802,397). Capital expenditure made under normal terms and conditions
for the period aggregated $1,382,755 (2003:$1,333,467, 2002:$542,545). At
reporting date $1,387,136 (2003:$86,614) remained payable, forming part of
the balance of trade creditors.
Capital expenditure through Agility Management Pty Ltd, a company
controlled by AGL, under normal terms and conditions for the period
aggregated $9,600,352 (2003:$1,128,915, 2002:$1,289,002). At reporting date
$1,160,210 (2003:$484,992) remained payable, forming part of the balance of
trade creditors.
Insurance was purchased from the AGL under normal terms and conditions. The
amount expensed during the year amounted to $113,723 (2003:$0, 2002:$0). At
reporting date $166,794 (2003:$0) remained payable, forming part of the
balance of trade creditors.
Loans
SCP Investments (No. 1) Pty Ltd has provided an interest free loan to
Southern Cross Pipelines Australia Pty Ltd, a 100% owned subsidiary, of
$1,781,800 (2003: $1,781,800) with no fixed repayment date. No repayments
were made during the year (2003: $0, 2002:$0).
19
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
23 IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS
SCP Investments (No. 1) Pty Ltd has commenced transitioning its accounting
policies and financial reporting from current Australian Standards to
Australian equivalents of International Financial Reporting Standards
("IFRS"). The consolidated entity has engaged consultants to perform
diagnostics and conduct impact assessments to isolate key areas that will
be impacted by the transition to IFRS. As a result of these procedures, SCP
Investments (No. 1) Pty Ltd has graded impact areas as high, medium or low
and will establish a project team to address each of the areas in order of
priority as represented by those gradings. As SCP Investments (No. 1) Pty
Ltd has a 30 June year end, priority will be given to the preparation of an
opening balance sheet in accordance with AASB equivalents to IFRS as at 1
July 2004. This will form the basis of accounting for Australian
equivalents of IFRS in the future, and is required when SCP Investments
(No. 1) Pty Ltd prepares its first fully IFRS compliant financial report
for the year ended 30 June 2006. Set out below are the key areas where
accounting policies will change and may have an impact on the financial
report of SCP Investments (No. 1) Pty Ltd. At this stage the consolidated
entity has not been able to reliably quantify the impacts on the financial
report.
Classification of Financial Instruments
Under AASB 139 Financial Instruments: Recognition and Measurement,
financial instruments will be required to be classified into one of five
categories, which will, in turn, determine the accounting treatment of the
item. The classifications are loans and receivables- measured at amortised
cost, financial assets held to maturity - measured at amortised cost,
financial assets held for trading -- measured at fair value with fair value
changes charged to net profit or loss, financial assets available for sale
-- measured at fair value with fair value changes taken to equity and
non-trading liabilities - measured at amortised cost. This will result in a
change in the current accounting policy that does not classify financial
instruments. Current measurement is at cost, with the derivative financial
instruments not recognised on balance sheet. The future financial effect of
this change in accounting policy is not yet known as the classification and
measurement process has not yet been completed.
Hedge Accounting
Under AASB 139 Financial Instruments: Recognition and Measurement, in order
to achieve a qualifying hedge the entity is required to meet the following
criteria:
- Identified the type of hedge - fair value or cash flow;
- Identify the hedged item or transaction;
- Identify the nature of the risk being hedged;
- Identify the hedging instrument;
- Demonstrate that the hedge has and will continue to be highly
effective; and
- Document the hedging relationship, including the risk management
objectives and strategy for undertaking the hedge and how
effectiveness will be tested.
This may result in a change in the entity's current accounting policy which
applies hedge accounting to its interest rate swap contracts. Under IFRS,
hedge accounting may be applied to the interest rate swap contracts, so
long as they meet the designation, documentation and effectiveness tests,
such that all movements in the fair market values of these cash flow hedges
will be recorded separately in equity and not the Income Statement.
Reliable estimation of the future financial effect of this change in
accounting policy has not yet been measured.
20
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
23 IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS (CONT)
Impairment of Assets
Under the Australian equivalent to International Accounting Standard
("IAS") 36 Impairment of Assets the recoverable amount of an asset is
determined as the higher of net selling price and value in use which is
determined on the basis of discounted cash flows. This will result in a
change in the group's current accounting policy which determines the
recoverable amount of an asset on the undiscounted net cash flows which
will be received from the assets' employment.
Under the new policy it is likely that impairment of assets will be
recognised sooner and may have an impact on earnings volatility. Impairment
losses may also need to be recognised at the date of transition to the new
IFRS. Reliable estimation of the future financial effects of this change in
accounting policy is impracticable because the conditions under which
impairment will be assessed are not yet known.
Income taxes
Under the Australian equivalent to IAS 12 Income Taxes, the consolidated
entity will be required to use a balance sheet liability method which
focuses on the tax effects of transactions and other events that affect
amounts recognised in either the Statement of Financial Position or a
tax-based balance sheet, rather than the current income statement approach.
The most significant impact will be the Pipeline License intangible asset,
which will lead to the recognition of a temporary difference on transition
to IFRS. It is not expected that there will be any further material impact
as a result of adoption of this standard.
Leases
Under AGAAP the operating lease payments are recognised as an expense as
they are incurred.
Under IFRS the operating lease payments must be recognised as an expense on
a straight line basis over the term of the lease. This method eliminates
the effects of any rent step ups.
Accordingly, under IFRS operating lease expenses for the year ended 30 June
2004 would be higher than under AGAAP. Estimation of the future financial
effects of this change in accounting policy is not yet known.
Prepaid Finance Fees
Under AGAAP, the costs relating to obtaining finance are capitalised and
amortised on a straight line basis over the life of the borrowings.
Under IFRS, these costs would be netted off against the balance of current
and non current interest bearing liabilities. The deferred financing costs
would be recognised as additional interest expense over the life of the
debt instrument using the effective interest rate method. Accordingly
interest expense under IFRS would be higher and amortisation of prepaid
finance fees would not be presented.
21
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
23 IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS (CONT)
Asset retirement obligations
Asset retirement obligations exist on the pipeline. Under AGAAP there are
no specific requirements for the treatment of such costs and no provision
has been made by the consolidated entity under AGAAP, as the impact on the
Statement of Financial Performance is not significant.
Under IFRS the consolidated entity would be required to recognise the fair
value of these obligations as a liability, with the cost capitalised as
part of the asset carrying value. The increase in carrying amount is
included in determining depreciation expense over the expected useful life.
Accordingly, the balance of property, plant and equipment would be higher
under IFRS, with a corresponding liability and increase in depreciation
expense.
22
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
24 FINANCIAL INSTRUMENTS
(a) INTEREST RATE RISK
The consolidated entity's exposure to interest rate risks and the effective
interest rates of financial assets and liabilities, both recognised and
unrecognised at the reporting date are as follows:
Fixed interest rate maturing in:
Floating Interest rate 1 year or less Over 1 to 5 years
2004 2003 2004 2003 2004 2003
$ $ $ $ $ $
(i) FINANCIAL ASSETS
Cash 41,490,431 62,995,665 0 0 0 0
Commercial Bills 50,990,297 0 0 0 0 0
Trade & other receivables 0 0 0 0 0 0
---------- ---------- -------- ------- --------- --------
Total financial assets 92,480,728 62,995,665 0 0 0 0
========== ========== ======== ======= ========= ========
Fixed interest rate maturing in:
Non-interest bearing Total carrying amount as per Weighted average
the statement of financial effective
position interest rate
2004 2003 2004 2003 2004 2003
$ $ $ $ % %
(i) FINANCIAL ASSETS
Cash 0 0 41,490,431 62,995,665 4.95 4.71
Commercial Bills 0 0 50,990,297 0 4.72 0
Trade & other receivables 9,732,319 9,192,352 9,732,319 9,192,352 N/A N/A
--------- --------- ----------- ----------
Total financial assets 9,732,319 9,192,352 102,213,047 72,188,017
========= ========= =========== ==========
Fixed interest rate maturing in:
Floating Interest rate 1 year or less Over 1 to 5 years
2004 2003 2004 2003 2004 2003
$ $ $ $ $ $
(ii) FINANCIAL
LIABILITIES
Trade creditors 0 0 0 0 0 0
Other payables 0 0 0 0 0 0
Intercompany payable -
tax sharing agreements 0 0 0 0 0 0
Bank Loan 0 0 25,415,600 15,524,800 224,984,400 250,400,000
Interest rate swaps # 201,736,960 209,882,880 0 0 (201,736,960) (209,882,880)
----------- ----------- ---------- ---------- ------------ ------------
Total financial liabilities 201,736,960 209,882,880 25,415,600 15,524,800 23,247,440 40,517,120
=========== =========== ========== ========== ============ ============
Fixed interest rate maturing in:
Non-interest bearing Total carrying amount as per Weighted average
the statement of financial effective
position interest rate
2004 2003 2004 2003 2004 2003
$ $ $ $ % %
(ii) FINANCIAL
LIABILITIES
Trade creditors 3,200,275 821,718 3,200,275 821,718 N/A N/A
Other payables 2,689,410 3,835,086 2,689,410 3,835,086 N/A N/A
Intercompany payable -
tax sharing agreements 0 0 0 0 N/A N/A
Bank Loan 250,400,000 265,924,800 7.13 7.01
Interest rate swaps # 0 0 0 0 N/A N/A
----------- ----------- ----------- -----------
Total financial liabilities 5,889,685 4,656,804 256,289,685 270,581,604
=========== =========== =========== ===========
# Notional principal amounts
23
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
24 FINANCIAL INSTRUMENTS (CONT).
(b) NET FAIR VALUES
All financial asset and liabilities of the consolidated entity have been
recognised at the balance date at their fair values except for the
following
Total Carrying amount as per the Aggregate net fair value
statement of financial position (i),(ii)
2004 2003 2004 2003
$ $ $ $
Financial liabilities;
Interest rate swaps # 0 0 1,914,090 8,724,960
--------- ------- --------- ---------
0 0 1,914,090 8,724,960
========= ======= ========= =========
# Interest rate swaps are not recognised in the statement of financial
position
(i) For all recognised financial instruments the carrying amount is used
as the approximate for fair value.
(ii) The fair value of the interest rate swap contracts is determined as
the difference in present value of the future interest cash flows.
(c) CREDIT RISK EXPOSURES
The Consolidated entity's maximum exposures to credit risk at reporting
date is relation to each class of recognised financial assets is the
carrying amount of those assets indicated in the Statement of Financial
Position. With regards to the interest rates swaps the consolidated
entity's maximum risk exposure is limited to the net fair value of the swap
agreement at reporting date, being $1,914,090, (2003: $8,724,960)
Concentration of credit risk on trade receivables for the consolidated
entity arise from customers in the following industries:
MAXIMUM CREDIT RISK EXPOSURE FOR EACH
CONCENTRATION (i)
PERCENTAGE OF TOTAL TRADE
DEBTORS $
SEGMENT 2004 2003 2004 2003
Mining 88.09 85.58 8,328,983 7,947,117
Power generation 11.91 14.42 1,126,397 1,338,862
------ ------ --------- ---------
100.00 100.00 9,455,380 9,285,979
====== ====== ========= =========
(i) The maximum credit risk exposure does not take into account the value
of any security held, in the event that other parties/entities fail to
perform their obligations under the contracts.
24
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
24 FINANCIAL INSTRUMENTS (CONT).
(d) HEDGING INSTRUMENTS
Interest Rate Hedges
At balance date, the consolidated entity had entered into interest rate
swap agreements at a fixed interest rate as detailed below. Settlement
amounts are payable at the end of each quarterly calculation period.
Details of the interest rate swap are as follows:
Notional Amount of Swap Maturity Date Fixed Interest Rate
$60,000,000 21 June 2006 6.65%
$50,000,000 21 June 2006 6.95%
$51,444,960 21 June 2006 5.06%
$28,844,280 21 June 2006 6.86%
$10,030,760 21 June 2006 6.78%
25 DIFFERENCES BETWEEN US GAAP AND AUSTRALIAN GAAP
The SCP Investments (No. 1) Pty Ltd consolidated financial report is
prepared in accordance with accounting principles generally accepted in
Australia (AGAAP). AGAAP has significant differences from the accounting
principles generally accepted in the United States (USGAAP). The
significant issues or differences between AGAAP and USGAAP that apply to
SCP Investments (No. 1) Pty Ltd are as follows:
(a) Long-Lived Assets
Asset retirement obligations
Asset retirement obligations exist on the pipeline. Under AGAAP there are
no specific requirements for the treatment of such costs and no provision
has been made by the consolidated entity under AGAAP, as the impact on the
Statement of Financial Performance is not significant.
Under USGAAP the consolidated entity would be required to recognise the
fair value of these obligations as a liability, with the cost capitalised
as part of the asset carrying value. The increase in carrying amount is
included in determining depreciation expense over the expected useful life.
Accordingly, the balance of property, plant and equipment would be higher
under USGAAP, with a corresponding liability and increase in depreciation
expense.
Intangibles
Under US GAAP, the purchase price of the consolidated entity's interest in
the joint venture's assets and liabilities would be allocated to all
specifically identifiable intangible assets and liabilities based on their
fair values. Amortisation of intangibles assets would be recorded over the
estimated life of each individual asset, which would result in differences
between AGAAP and US GAAP in the amount of amortisation recorded in a
particular year.
(b) Cash
Under USGAAP cash and equivalents are defined as short term, highly liquid
investments that are readily convertible to known cash amounts and so near
their maturity, generally less than 90 days when purchased, that they
represent insignificant risk of changes in value because of changes in
interest rates. Accordingly under USGAAP the commercial bills would be
classified as cash equivalents rather than receivables.
25
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
25 DIFFERENCES BETWEEN US GAAP AND AUSTRALIAN GAAP (CONTINUED)
(c) Income taxes
Under AGAAP, income tax expense is based on the operating profit
before income tax adjusted for any permanent differences. Timing
differences are recorded in the statement of financial position
as deferred tax liabilities and assets using the liability
method of tax effect accounting. Future income tax benefits
relating to tax losses and timing differences are not recorded
as an asset unless the benefit is considered virtually certain
of being realised. Under AGAAP, the amortisation of the
intangible asset related to the pipeline license is treated as a
permanent difference.
Under USGAAP, the consolidated entity will be required to use a
balance sheet liability method, which focuses on the tax effects
of transactions and other events that affect amounts recognised
in either the Statement of Financial Position or a tax-based
balance sheet. The amortisation of the intangible asset related
to the pipeline license would result in the recognition of a
deferred tax asset under USGAAP. The deferred tax liability and
asset balances would also be decreased or increased for the
income tax effect of accounting differences between AGAAP and
USGAAP.
Under AGAAP, all deferred tax balances are classified as non
current. Under USGAAP, the classification between current and
non current is based on the statement of financial position
classification of the underlying asset or liability that created
the difference.
(d) Prepaid Finance Fees
Under AGAAP, the costs relating to obtaining finance are
capitalised and amortised on a straight line basis over the life
of the borrowings.
Under USGAAP, these costs would be reported as deferred
financing costs and classified as a non-current asset. The
deferred financing costs would be recognised as additional
interest expense over the life of the debt instrument using the
effective interest rate method. Accordingly interest expense
under USGAAP would be higher and amortisation of prepaid finance
fees would not be presented.
(e) Interest Rate Swaps
Under AGAAP, the interest rate swaps are specific hedges for the
loan facility and are not recognised in the financial
statements. The net receipts or payments due are recognised in
the income statements as an adjustment to interest expense.
USGAAP requires all derivative instruments to be recognised at
fair value as either assets or liabilities in the statement of
financial position. The accounting for changes in the fair value
(i.e. gains or losses) of a derivative instrument depends on
whether it has been designated and qualifies as part of a
hedging relationship and further, on the type of hedging
relationship. The consolidated entity's interest rate swaps do
not meet the hedging criteria under USGAAP. Accordingly, under
USGAAP the consolidated entity would record a liability for the
fair value of the interest rate swaps at 30 June 2004 and 2003
(as disclosed at note 24b) and a corresponding decrease in net
income for the year ended 30 June 2004 for the change in the
fair value of the instruments.
26
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
(f) Leases
Operating Leases
Under AGAAP the operating lease payments are recognised as an
expense as they are incurred.
Under USGAAP the operating lease payments must be recognised as
an expense on a straight line basis over the term of the lease.
This method eliminates the effects of any rent step ups.
Accordingly, under USGAAP operating lease expenses for the year
ended 30 June 2004 would be higher than under AGAAP.
(g) USGAAP- CAPTIONED STATEMENT OF FINANCIAL PERFORMANCE.
The information content of the statement of financial
performance prepared in accordance with AGAAP differs from the
information content of the statement of operations in accordance
with U.S. GAAP and Regulation S-X of the United States
Securities and Exchange Commission ("Regulation S-X"). The
following statement of financial performance reclassifies the
amounts measured in accordance with AGAAP to the presentation
format of US GAAP and Regulation S-X; it does not present
results of operations in accordance with US GAAP.
UNAUDITED UNAUDITED
2004 2003 2002
NOTES $ $ $
OPERATING REVENUE:
Gas Transmission Services 2 85,257,236 82,581,902 76,589,694
----------- ----------- -----------
Total revenues from operating activities 85,257,236 82,581,902 76,589,694
OPERATING EXPENSES:
Pipeline Operations and maintenance 2 (13,292,715) (11,604,064) (9,965,520)
Depreciation and amortisation 2 (14,089,846) (13,386,389) (11,707,716)
Selling, general and administrative (1,489,280) (628,240) (403,713)
----------- ----------- -----------
Total operating expenses (28,871,841) (25,618,693) (22,076,949)
OPERATING INCOME 56,385,395 56,963,209 54,512,745
OTHER INCOME / (EXPENSE):
Interest income from third parties 2 4,006,352 2,514,613 1,394,736
Interest expense 2 (19,105,045) (19,871,074) (20,386,940)
Loss on disposal of fixed assets 2 (271,689) (45,519) (10,887)
----------- ----------- -----------
(15,370,382) (17,401,980) (19,003,091)
----------- ----------- -----------
NET INCOME BEFORE TAX EXPENSE 41,015,013 39,561,229 35,509,654
Income tax benefit/(expense) 4 29,857,580 (12,921,291) (11,641,592)
----------- ----------- -----------
NET INCOME AFTER TAX EXPENSE 70,872,593 26,639,938 23,868,062
=========== =========== ===========
27
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2004 (CONTINUED)
30 JUNE 2003 AND 2002 (UNAUDITED)
26 SUBSEQUENT EVENTS
On 7 September 2004, the directors of the company declared a
final unfranked dividend in respect of the 2004 year of
$64,272,000. This was paid on 8 September 2004. The dividend has
not been provided for in the 30 June 2004 financial statements.
27 CORPORATE INFORMATION
SCP Investments (No. 1) Pty Ltd is a company limited by shares
that is incorporated and domiciled in Australia.
The registered office of SCP Investments (No. 1) Pty Ltd is
located at: Level 5, 241 O'Riordan Street Mascot NSW 2020
The entity employed 0 employees as of 30 June 2004 (2003: 0
employees).
28
SCP INVESTMENTS (NO. 1) PTY LTD
DIRECTORS' DECLARATION
The directors declare that:
(a) the consolidated financial statements and accompanying notes;
(i) give a true and fair view of the consolidated entity's
financial position as at 30 June 2004 and of its
performance for the year then ended;
(ii) comply with applicable Australian Accounting Standards
and Urgent Issues Group Views Accounting Standards, with
the exception of the presentation of Parent company
financial statements; and
(b) there are reasonable grounds to believe that the consolidated entity
will be able to pay its debts as and when they fall due.
/s/ MJ McCormack /s/ J.K. McDonald
---------------------------- ----------------------------------
Director Director
In MJ McCormack In J.K. McDonald
-------------------------- --------------------------------
29 OCTOBER 2004 29 OCTOBER 2004
29
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of SCP Investments (No. 1) Pty Ltd
We have audited the accompanying consolidated statement of financial position of
SCP Investments (No. 1) Pty Ltd as of June 30, 2004, and the related
consolidated statements of financial performance and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SCP Investments
(No. 1) Pty Ltd at June 30, 2004, and the consolidated results of its operations
and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in Australia.
Accounting principles generally accepted in Australia vary in certain
significant respects from U.S. generally accepted accounting principles.
Information relating to the nature and effect of such differences is presented
in Note 25 to the consolidated financial statements.
/s/ Ernst & Young
Perth, Australia
29 October 2004
30