EXHIBIT 99(e)
SCP INVESTMENTS (NO.1) PTY LTD
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JULY 2004 TO 17 AUGUST 2004
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JULY 2004 TO 17 AUGUST 2004
CONTENTS PAGE NO.
- -------- --------
Consolidated Statement of Financial Performance 1
Consolidated Statement of Cash Flows 2
Notes to and forming part of the Consolidated Financial Statements 3 - 9
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
FOR THE PERIOD FROM 1 JULY 2004 TO 17 AUGUST 2004
2004
$ AUSTRALIAN
NOTES (UNAUDITED)
----- ------------
Revenues from ordinary activities 2 12,353,778
Depreciation and amortisation expenses 2 (2,012,652)
Borrowing costs expense 2 (2,538,710)
Other expense from ordinary activities 2 (2,206,201)
-------------
Total expenses (6,757,563)
PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME
TAX EXPENSE 5,596,215
Income tax expense relating to ordinary
activities 4 (1,814,679)
-------------
PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME
TAX EXPENSE 3,781,536
=============
The above Statement of Financial Performance should be read in
conjunction with the accompanying notes.
1
SCP INVESTMENTS (NO. 1) PTY LTD
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JULY 2004 TO 17 AUGUST 2004
2004
$ AUSTRALIAN
NOTES (UNAUDITED)
------- --------------
CASH FLOW FROM OPERATING ACTIVITIES
Receipts from customers 16,376,860
Payments to suppliers (2,120,833)
GST paid (1,512,711)
Interest received 420,583
Interest and other finance costs paid 0
Income tax paid (PAYG) 0
-------------
Net cash flows from operating activities 7 13,164,169
-------------
CASH FLOW FROM INVESTING ACTIVITIES 0
-------------
CASH FLOW FROM FINANCING ACTIVITIES 0
-------------
Net increase in cash held 13,164,169
Cash at beginning of the financial year 41,490,431
-------------
CASH AT 17 AUGUST 2004 54,654,600
=============
The above Statement of Cash Flows should be read in
conjunction with the accompanying notes
2
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JULY 2004 TO 17 AUGUST 2004
(UNAUDITED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated general purpose financial statements cover the
period from 1 July 2004 to 17 August 2004, the date in which Australian
Pipeline Trust acquired the remaining interest in SCP Investments (No.
1) Pty Ltd (Note 8). 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:
- 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;
- 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.
3
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
4
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
2 REVENUE AND EXPENSE ITEMS
FOR THE PERIOD
1 JULY 2004 TO
17 AUGUST 2004
$ AUSTRALIAN
--------------
REVENUES FROM ORDINARY ACTIVITIES: 11,693,231
------------
REVENUES FROM OPERATING ACTIVITIES
Revenues from services rendered (Note 3)
11,693,231
------------
Total revenues from operating activities
REVENUES FROM NON OPERATING ACTIVITIES 660,547
Interest from third parties 0
------------
Proceeds from the sale of non-current assets
Total revenues from outside the operating activities 660,547
------------
12,353,778
============
Total revenues from ordinary activities
DEPRECIATION AND AMORTISATION EXPENSES: 1,559,937
Depreciation of plant and equipment 66,146
Depreciation of buildings and fixtures 386,569
------------
Amortisation of pipeline licence
2,012,652
============
Total depreciation and amortisation expensed
BORROWING COSTS EXPENSE:
Interest to third parties 2,449,163
Borrowing costs 484
Amortisation of prepaid finance fees 89,063
------------
Total borrowing costs expensed 2,538,710
============
Other expenses from ordinary activities includes:
Bad & doubtful debts recovered
Remuneration of the auditors for auditing and 0
reviewing accounts
Remuneration of the auditors for other services - tax 44,360
advisory
Written down value of disposed PP&E (i) 175,311
Pipeline operations costs 0
Operating lease rentals 1,728,485
Other - Administrative 0
258,045
------------
Total other expenses 2,206,201
============
(i) Net losses on disposal of PP&E 0
5
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
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.
4 INCOME TAX EXPENSE
FOR THE PERIOD
1 JULY 2004 TO
17 AUGUST 2004
$ AUSTRALIAN
--------------
Operating Profit 5,596,215
Prima facie tax payable on operating profit at 30% 1,678,865
(2004: 30%)
Add: Tax effect of permanent and other differences:
- - non deductible depreciation & amortisation 135,814
- - other 0
- - under provision of previous year 0
--------------
Income tax expense attributable to operating profit 1,814,679
==============
5 CASH ASSETS
Cash on hand 441
Cash at bank - GGT JV a/c 3,350,989
Proceeds accounts - ANZ 51,303,170
--------------
Total cash assets at 17 August 2004 54,654,600
==============
6 RETAINED PROFITS
Balance at the beginning of the financial year 64,272,593
Net profit attributable to members of the parent entity
Dividends provided for or paid 3,781,536
0
--------------
Balance at 17 August 2004 68,054,129
==============
6
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
7 NOTES TO THE STATEMENT OF CASH FLOWS
Operating profit after income tax 3,781,536
Non-Cash Flows in Operating Profit 0
- - Depreciation 1,626,083
- - Amortisation 475,632
- - Net (profit)/loss on disposal of assets 0
Changes in Assets and liabilities 0
- - (Increase)/Decrease in trade debtors 1,440,420
- - (Increase)/Decrease in other receivable (982,662)
- - (Increase)/Decrease in prepayments (322,396)
- - (Increase)/Decrease in insurance claims 0
- - (Increase)/Decrease in inventories (35,392)
- - Increase/(Decrease) in creditors and accruals 3,480,917
- - Increase/(Decrease) in provisions 0
- - Increase/(Decrease) in deferred revenue 1,885,351
- - Increase/(Decrease) in deferred income tax (565,605)
- - Increase in tax liabilities 2,380,285
--------------
Cash flow from operations 13,164,169
==============
8 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
On August 17, 2004, Australian Pipeline Trust acquired the remaining
interest in SCP Investments (No. 1) Pty Ltd such that they now own 100%
of the consolidated entity.
Prior to the sale, Australian Pipeline Trust owned 55% and CMS
Goldfields Gas Transmission Australia Pty Ltd owned 45% of SCP
Investments (No.1) Pty Ltd. 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 Pipeline Trust
acquired CMS Goldfields Gas Transmission Australia Pty Ltd thereby
obtaining 100% interest in SCP Investments (No. 1) Pty Ltd. Australian
Gas Light Company ("AGL"), a company listed on the Australian stock
exchange, owns 30% of Australian Pipeline Trust.
9 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) 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
7
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
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.
(b) 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.
(c) 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.
(d) 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.
8
SCP INVESTMENTS (NO. 1) PTY LTD
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD
1 JULY 2004 TO
17 AUGUST 2004
NOTES $ AUSTRALIAN
-------- -----------------
OPERATING REVENUE:
Gas Transmission Services 2 11,693,231
--------------
Total revenues from operating activities 11,693,231
OPERATING EXPENSES:
Pipeline Operations and maintenance 2 (1,728,485)
Depreciation and amortisation 2 (2,012,652)
Selling, general and administrative 2 (477,716)
--------------
Total operating expenses (4,218,853)
OPERATING INCOME 7,474,378
OTHER INCOME / (EXPENSE):
Interest income from third parties 2 660,547
Interest expense 2 (2,538,710)
Loss on disposal of fixed assets 2 0
--------------
(1,878,163)
--------------
NET INCOME BEFORE TAX EXPENSE 5,596,215
Income tax expense 4 (1,814,679)
--------------
NET INCOME AFTER TAX EXPENSE 3,781,536
==============
10 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.
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.
9