EXHIBIT 99(a)
JORF LASFAR ENERGY COMPANY S.C.A
JLEC
CENTRALE THERMIQUE DE JORF LASFAR
B P 99 SIDI BOUZID
EL JADIDA
MOROCCO
Tel : 212 23 34 53 71
Fax : 212 23 34 54 05
US GAAP
FINANCIAL STATEMENTS
AS OF
DECEMBER 31, 2006, 2005 AND 2004
AUDITED
R.C. n degree 86655 - Patente n degree 35511273 - Identification Fiscale
(I.S TVA) n degree 1021595
JORF LASFAR ENERGY COMPANY
INDEX TO FINANCIAL STATEMENTS
Page(s)
-------
Balance Sheet
As of December 31, 2006, 2005, and 2004 ........................ 2
Statement of Income
For years ending December 31, 2006, 2005, and 2004 ............. 3
Statement of Stockholders' Equity
For years ending December 31, 2006, 2005, and 2004 ............. 4
Statement of Cash Flows
For years ending December 31, 2006, 2005, and 2004 ............. 5
Notes to US GAAP Financial Statements ..................................... 6-27
JORF LASFAR ENERGY COMPANY
BALANCE SHEET
Note December 31, 2006 December 31, 2005 December 31, 2004
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
ASSETS
Current Assets
Cash ............................................. 3.1 70,213 62,763 69,800
Inventories ...................................... 2.c & 4 49,901 51,943 59,318
Account Receivable ............................... 5 102,585 114,217 123,867
Prepayments ...................................... 6 & 2.h 4,604 7,936 3,389
Recoverable VAT .................................. 8 0 0 1,540
Net investment from $ DFL model .................. 2.b & 17.3 7,765 11,645 9,644
Net investment from Euro DFL model ............... 2.b & 17.3 19,761 15,132 28,264
--------- --------- ---------
Total current assets ........................ 254,829 263,635 295,823
Long Term Assets, net
Restricted Cash .................................. 3 2 258 231 22,591
Fixed Assets ..................................... 7 17,124 14,881 12,159
Net investment from $ DFL model .................. 2.b & 17.3 637,313 645,078 656,723
Net investment from Euro DFL model ............... 2.b & 17.3 386,080 363,316 437,791
$ Capacity Charges less than $ DFL model ......... 13.1 0 76 0
Euro Capacity Charges less than Euro DFL model ... 13.2 0 425 0
Deferred Tax Asset ............................... 2.f 0 0 1,556
Other Long Term Assets ........................... 9 12,833 13,389 16,339
--------- --------- ---------
Total Long Term Assets ...................... 1,053,607 1,037,396 1,147,158
--------- --------- ---------
Total assets ................................ 1,308,436 1,301,031 1,442,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable to third parties ................ 10 & 2.h 57,603 54,319 73,332
Accounts payable to related parties .............. 11 & 2.h 133,032 104,428 96,410
VAT Liability ................................... 8 5,402 7,131 0
Taxes payable .................................... 12 & 2.h 643 499 565
Current part of Long-term loans in US Dollars .... 15 25,749 25,749 25,749
Current part of Long-term loans in Euro .......... 15 46,392 41,531 48,043
Other current liabilities ........................ 14 7,953 7,327 9,363
--------- --------- ---------
Total current liabilities ................... 276,773 240,984 253,461
Non-Current Liabilities
Long-term loans in US Dollars .................... 15 135,180 160,928 186,677
Long-term loans in Euro .......................... 15 243,558 259,569 348,314
$ Capacity Charges greater than $ DFL model ...... 13.1 293 0 44
Euro Capacity Charges greater than Euro DFL model 13.2 56 0 73
Deferred Tax Liability ........................... 2.f 11,884 3,346 0
Derivative Instrument Liability .................. 20 9,140 15,107 23,446
Postemployment Benefits .......................... 19 2,795 2,020 13,782
--------- --------- ---------
Total non-current liabilities ............... 402,906 440,970 572,336
Commitment and Contingencies 22
Stockholders' Equity
Common Stock ..................................... 16.1 58 58 58
Convertible Stockholders' Securities ............. 16.2 201,425 201,425 201,425
Preferred Stock .................................. 16.3 185,930 185,930 185,930
Retained Earnings ................................ 16.4 250,484 246,771 253,216
Other Comprehensive Income or (Loss) ............. 20 (9,140) (15,107) (23,446)
--------- --------- ---------
Total stockholders' equity .................. 628,757 619,077 617,183
--------- --------- ---------
Total liabilities and stockholders' equity .. 1,308,436 1,301,031 1,442,980
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 2
JORF LASFAR ENERGY COMPANY
STATEMENT OF INCOME
January 1, 2006 January 1, 2005 January 1, 2004
to to to
Note December 31, 2006 December 31, 2005 December 31, 2004
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
REVENUE
Lease Revenue from $ DFL model ...... 2.b & 17.2 87,704 89,258 80,476
Lease Revenue from Euro DFL model ... 2.b & 17.2 90,449 92,865 104,078
Energy Payments ..................... 241,206 267,215 216,992
O&M Revenue ......................... 56,031 53,212 52,406
Supplemental Capacity Charges ....... 3,653 3,597 4,173
License Tax Reimbursement ........... 3,099 3,038 2,864
Other ............................... 488 169 844
------- ------- -------
TOTAL REVENUE 482,630 509,354 461,833
OPERATING EXPENSES
Coal Cost ........................... 255,785 276,294 224,797
Fuel Oil Cost ....................... 1,151 1,476 1,085
O&M Costs ........................... 2.h 36,225 38,279 32,448
Operator's Incentive ................ 3,657 2,906 4,281
Generator Costs ..................... 2.h 9,779 9,231 11,284
License Tax Costs ................... 3,099 3,038 2,864
Amortization of Major Maintenance ... 9.1 2,529 2,529 2,564
Depreciation of Other Assets ........ 3,165 3,316 2,966
Postemployment Benefits ............. 19 & 2.h 1,263 3,545 3,589
------- ------- -------
TOTAL OPERATING EXPENSES 316,654 340,614 285,879
OPERATING INCOME 165,976 168,741 175,954
FINANCIAL ITEMS
Financial Income .................... 2,778 2,682 1,786
Exchange Gain (+) or Loss (-) ....... 2.d 2,547 (4,615) 1,867
Financial Expenses .................. 18 (36,521) (40,161) (46,893)
------- ------- -------
TOTAL FINANCIAL ITEMS (31,195) (42,094) (43,239)
INCOME BEFORE TAXES 134,780 126,647 132,715
Income Taxes
Current ........................ 2.e 16,846 10,029 9,077
Deferred ....................... 2.f 8,703 5,057 (1,556)
------- ------- -------
NET INCOME 16.4 & 21 109,231 111,561 125,194
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 3
JORF LASFAR ENERGY COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
January 1, 2006 January 1, 2005 January 1, 2004
to to to
December 31, December 31, December 31,
Note 2006 2005 2004
---- ---- ---- ----
COMMON STOCK
At beginning and end of period in number of shares 16.1 5,500 5,500 5,500
At beginning and end of period in thousands of USD 16.1 58 58 58
(000) U.S. Dollars
CONVERTIBLE STOCKHOLDERS' SECURITIES
At beginning of period 201,425 201,425 201,425
Conversion of Convertible Stockholders' Securities to Preferred Stock 0 0 0
Conversion of Convertible Stockholders' Securities to Common Stock 0 0 0
------- ------- -------
At end of period 16.2 201,425 201,425 201,425
PREFERRED STOCK
At beginning of period 185,930 185,930 185,930
Conversion of Convertible Stockholders' Securities to Preferred Stock 0 0 0
Conversion of Preferred Stock to Common Stock 0 0 0
------- ------- -------
At end of period 16.3 185,930 185,930 185,930
RETAINED EARNINGS (DEFICIT)
At beginning of period 246,770 253,216 147,499
Net income 109,231 111,561 125,194
Common stock dividend (86,955) (97,608) 0
Preferred stock dividend (8,981) (9,585) (9,349)
Convertible stockholders' securities (9,581) (10,813) (10,128)
------- ------- -------
At end of period 16.4 250,484 246,770 253,216
OTHER COMPREHENSIVE INCOME (LOSS) (A)
Derivative Instruments
At beginning of period (15,107) (23,446) (22,050)
Reclassification of gains (losses) included in net income 5,094 6,680 7,675
Unrealized gain (loss) on derivative instruments 873 1,659 (9,072)
------- ------- -------
At end of period 20 (9,140) (15,107) (23,446)
------- ------- -------
628,757 619,077 617,183
======= ======= =======
(a) Disclosure of Comprehensive Income (Loss)
Net income 109,231 111,561 125,194
Derivative instruments
Reclassification of gains (losses) in net income 5,094 6,680 7,675
Unrealized gain (loss) on derivative instruments 873 1,659 (9,072)
------- ------- -------
Total Comprehensive Income 115,198 119,900 123,797
======= ======= =======
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 4
JORF LASFAR ENERGY COMPANY
STATEMENT OF CASH FLOWS
January 1, 2006 January 1, 2005 January 1, 2004
to to to
December 31, 2006 December 31, 2005 December 31, 2004
(000) U.S. (000) U.S. (000) U.S.
Note Dollars Dollars Dollars
---- ------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Payments received from ONE....................................... $ 558,250 $ 593,249 $ 526,880
Interest received................................................ 2,406 2,412 1,538
Rebates paid to ONE.............................................. (42,370) (40,023) (58,108)
Corporate Income Tax Payments.................................... (10,330) (14,258) (12,795)
Insurance Payments............................................... (4,696) (5,339) (2,927)
Interest Payments............................................... (36,478) (41,423) (46,626)
Payments to Coal Suppliers....................................... (233,045) (280,730) (210,454)
Payments of Operating Costs...................................... (60,685) (62,375) (58,302)
Payments of and for Postemployment Benefits...................... 19 (556) (13,826) (601)
Cash Effect of Value Added Tax................................... (630) 8,693 (12,393)
--------- --------- ---------
Net cash provided (+) or used (-) by operating activities... 21 171,866 146,380 126,211
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net decrease (increase) in restricted cash....................... 0 22,324 60,795
Acquisition of fixed assets...................................... (6,908) (4,958) (6,379)
Payment of Major Maintenance costs............................... (1,750) 0 0
--------- --------- ---------
Net cash provided (+) or used (-) by investing activities... (8,658) 17,366 54,416
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans.............................................. 0 0 0
Proceeds of share capital payments............................... 0 0 0
Repayment of loans............................................... (70,071) (69,503) (69,900)
Payment of Convertible Securities interest....................... (10,185) (10,308) (9,595)
Payment of Preferred Stock dividends............................. (9,401) (9,515) (8,857)
Payment of Common Stock dividends................................ (69,333) (76,093) (89,703)
Repayment of Stockholders loans.................................. 0 0 0
Purchase of Preferred Stock shares............................... 0 0 0
Purchase of Common Stock shares.................................. 0 0 0
--------- --------- ---------
Net cash provided (+) or used (-) by financing activities... (158,990) (165,419) (178,055)
Effect of exchange rate changes on cash............................ 3,232 (5,364) 1,617
CASH AT BEGINNING OF PERIOD.......................................... 62,763 69,800 65,611
NET INCREASE (DECREASE) IN CASH DURING PERIOD........................ 7,450 (7,037) 4,188
--------- --------- ---------
CASH AT END OF PERIOD................................................ 3.1 $ 70,213 $ 62,763 $ 69,800
========= ========= =========
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 5
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
1. GENERAL
A. BACKGROUND
The power station at Jorf Lasfar is located on the Atlantic coast of Morocco,
adjacent to the Port of Jorf Lasfar, in the Province of El Jadida. This location
is approximately 127 km south--west of Casablanca. Units 1 and 2 of the power
station were constructed by GEC Alstom for the Moroccan Electricity Company,
Office National de l'Electricite ("ONE"), and are now in commercial operation.
Each of these existing Units is 330 MW, fired by coal. In October of 1994, the
ONE issued a public tender for international companies to expand the power
station at Jorf Lasfar. In February of 1995, the ONE selected the "Consortium"
of ABB Energy Ventures and CMS Generation as the preferred bidder and exclusive
partner for negotiation. In April of 1996, the Consortium and the ONE reached
agreement in principle, and initialed the necessary Project Agreements.
B. ESTABLISHMENT
In order to officially conclude and implement these Project Agreements, the
Consortium established the Jorf Lasfar Energy Company (the "Company" or "JLEC")
on January 20, 1997. The Company was established as a limited partnership
("societe en commandite par actions") in accordance with the Laws of the Kingdom
of Morocco, with Commercial Registration Number 86655, Fiscal Identification
Number 1021595, and Patente Number 35511274. In accordance with its charter
documents, the Company's objective and purpose is to construct, operate, manage
and maintain the power station at Jorf Lasfar, including the development,
financing, engineering, design, construction, commissioning, testing, operation
and maintenance of two (2) new coal-fired Units, which are very similar in size
and technology to the existing Units. In order to secure its fuel supply the
Company also operates and maintains the coal-unloading pier in the Port of Jorf
Lasfar. For these activities, the Company received a "right of possession"
("droit de jouissance") for the Site, the existing Units, the new Units and coal
unloading pier. This "right of possession" will continue for the duration of the
Project Agreements, which is anticipated to be 30 years, ending on September 13,
2027.
C. COMPANY LOAN, TRANSFER OF POSSESSION, PROJECT FINANCING AND INITIAL
DISBURSEMENT
On September 12, 1997, all Project Agreements were signed, the Company Loan
Agreement was executed and the first disbursement of the Company Loan was used
to pay the TPA fee to ONE. As a consequence, JLEC received possession of the
power station at Jorf Lasfar on September 13, 1997, and began to sell its
available capacity and net generation to ONE. All remaining requirements for
project financing were completed in November, and initial disbursement of the
Project Loans occurred on November 25, 1997.
D. CONSTRUCTION, COMMERCIAL OPERATION, PURCHASE OF COMPANY LOAN AND REPAYMENT OF
PROJECT LOANS
After a period of construction lasting 33 months and 41 months, Unit 3 and 4
began normal commercial operation on June 9, 2000, and February 2, 2001,
respectively. Consequently, the JLEC stockholders purchased 100% of the Company
Loan Notes on December 11, 2000, and JLEC began the repayment of all Project
Loans on May 15, 2001. JLEC is scheduled to complete the repayment of all
Project Loans on February 15, 2013.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The Company's financial statements are prepared using the historical cost
convention. The accounting and reporting policies of the Company are in
accordance with the generally accepted accounting principles of Morocco, which
are called "Code General de Normalisation Comptable" or "CGNC". Financial
statements are prepared in accordance with these CGNC standards, and expressed
in Dirhams. In addition to and separately from Moroccan (CGNC) financial
statements in Dirhams, the Company uses the U.S Dollar as functional currency,
and has prepared these financial statements in accordance with generally
accepted accounting principles of the United States.
Page 6
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
B. REVENUE RECOGNITION
On September 12, 1997, the Company and the Office National de L'Electricite
executed a set of contracts related to the power station at Jorf Lasfar. In
accordance with Statement of Financial Accounting Standard (SFAS) No. 13, these
contracts are accounted for as a direct financing lease. Accordingly, JLEC (the
"Lessor") will receive a stream of payments from ONE (the "Lessee") over the
term of the lease. The term of the lease is determined in accordance with SFAS
No. 13 Section (5)(f) which has been superseded by SFAS No. 98 Section 22(a).
The following policies are used to calculate the minimum lease payments and the
unearned income from the lease.
MINIMUM LEASE PAYMENTS are determined in accordance with SFAS
No. 13 Section 5(j), and are based on the capacity payments
that ONE will take to JLEC. These minimum lease payments do
not include reimbursable or executory costs such as the
reimbursement of coal costs. The sum of these capacity
payments equals the gross investment under the lease.
This gross investment minus the net investment in the plants
is defined to be the UNEARNED INTEREST INCOME. This unearned
interest income will be accreted and recognized into earnings
as LEASE REVENUE over the lease term using the effective
interest method so as to produce a constant periodic rate of
return on the net investment.
The NET INVESTMENT represents the cost of acquiring and
constructing the leased assets. These ACQUISITION AND
CONSTRUCTION COSTS include the following items which are
capitalized and allocated to Units 1 and 2 and Units 3 and 4
based upon appropriate allocation methodologies:
TRANSFER OF POSSESSION AGREEMENT (TPA): The TPA payment
is included in the cost basis of the leased assets.
DIRECT CONSTRUCTION COSTS: All direct costs related to
construction are included in the cost basis of the
leased assets.
CAPITALIZED COSTS: Interest and financing costs incurred
during construction are capitalized and included in the
cost of the constructed units.
PROJECT DEVELOPMENT COSTS AND FEES: These costs and fees
are also capitalized and included in the cost basis of
the leased assets.
FINANCING COSTS: Interest expense is recognized on the
effective interest method over the life of the debt. Other
financing costs such as commitment fees, guarantee fees, etc.
are considered a component of the interest expense of the
related debt or financing. As such, they are amortized into
expense using the effective interest method over the life of
the related debt or financing.
C. INVENTORIES
The Company accounts for inventories by consistently applying the FIFO method
for spare part inventory valuation and average cost method for Coal and other
inventory valuation. Inventories are periodically revalued to the lessor of
market value or cost.
Page 7
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
D. FOREIGN CURRENCY TRANSACTIONS
The books and records of the Company for U.S. GAAP are maintained in U.S.
Dollars, which is both the reporting and functional currency. Transactions in
other currencies are translated to U.S. Dollars at the spot rate for current
period expenses and at the settlement rate for non-period transactions. Monetary
assets and monetary liabilities outstanding in other foreign currencies on
balance sheet dates are translated into U.S. Dollars at rates prevailing on such
balance sheet dates. Exchange gains and losses on those foreign currency
operations are included in determining net income for the period in which
exchange rates change.
E. CORPORATE TAX
Current Income tax is determined under Moroccan Income tax rules. In 1997, JLEC
signed a "tax incentive" convention with the Moroccan tax authorities. The main
principles of this convention are summarized below:
- - Income is subject to corporate tax rate of 35%
- - Income tax holiday period is ten years
- - Income tax holiday period starts on the "commercial operation date" for
each unit
- - Income tax holiday is 100% during the first five-year period then at 50%
of the income tax rate during the second five-year period
- - Income not related to the sale of electricity is subject to a tax rate of
35%
The "commercial operation date" for Units 1 and 2, Unit 3 and Unit 4 were
September 13, 1997, June 10, 2000 and February 3, 2001, respectively. On
September 13, 2002, income related to Units 1 and 2 became taxable at 17.5%. On
June 10, 2005, income related to Unit 3 became taxable at 17.5%. On February 3,
2006, income derived from Unit 4 became taxable at 17.5%.
F. DEFERRED INCOME TAX
As of December 31, 2006, the applicable tax rate on Units 1, 2, 3 and 4 is
17.5%. JLEC determines and books the current income tax (US$ 16,846,482 for
2006) as required by the tax laws and regulations of Morocco. Temporary
differences between US GAAP and the CGNC balance sheets may create the need to
record deferred income taxes. In particular, the treatment of Net Investment and
revenue recognition (as disclosed in note 2.b above) under US GAAP are different
from the treatment of these items under the tax laws and regulations of Morocco.
The main temporary differences result from the use of the Direct Financing Lease
method under US GAAP which generated a Deferred Tax Liability of $ 14,482,264
and differences in the timing of the deductibility of pension liabilities which
generated a Deferred Tax Asset of $ 2,277,793. The total of deferred tax
liability is $ 12,204,291 ($3,501,239 as of December 31, 2005 and $0 as of
December 31, 2004). The total of the deferred tax asset amounts to $ 0 ($0 as of
December 31, 2005 and $1,555,763 as of December 31, 2004).
G. OFF BALANCE SHEET COMMITMENTS
The Company discloses all off-balance sheet commitments, if any, on balance
sheet dates.
H. RECLASSIFICATIONS
Certain amounts for the prior period have been reclassified for comparative
purposes. These reclassifications, however, did not change the Total Revenue or
Total Operating Expenses of the prior period.
I. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual result could differ from these estimates and
assumptions. In management's opinion, the information contained in this report
reflects all adjustments of a normal recurring nature necessary to assure the
fair presentation of financial position, results of operations and cash flows
for the periods presented.
Page 8
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
3. CASH
3.1 Cash
The Company's cash as of December 31, 2006, includes the initial capital
deposits of the Company's stockholders, as explained further in Note 16.1. Such
cash is held in Moroccan Dirhams in accounts at CITIBANK MAGHREB, which is
located at Zenith Millenium Immeuble 1, Lotissement Attaoufik, Sidi Maarouf,
Casablanca Morocco. The remainder of the company's' cash is held by the Offshore
Collateral Agent, Deutsche Bank Trust Company Americas in US$ and Euro, and by
the Onshore Collateral Agent, BMCI - Banque Marocaine pour le Commerce et
l'Industrie in Moroccan Dirhams and US$.
The cash balances includes the following categories :
12/31/06 12/31/05 12/31/04
US$ US$ US$
---------- ---------- ----------
Off-shore Revenue in US$ 19,111,583 23,487,215 19,658,389
Off-shore Revenue in Euro 5,843,063 5,263,923 6,471,506
---------- ---------- ----------
Total Off-Shore Revenue 24,954,646 28,751,138 26,129,895
On-shore O&M Account - Generator 6,680,838 5,151,140 12,565,202
On-shore O&M Account - Operator 357,352 1,042,679 2,468,763
Off-shore O&M Accounts 23,958 6,071 4,742
---------- ---------- ----------
Total O&M Accounts 7,062,148 6,199,890 15,038,706
Fuel & Spare Part Accounts 29,041,657 18,727,645 18,388,897
Off-shore Debt Service Accrual Accounts in US$ 3,394,550 3,526,813 3,641,836
Off-shore Debt Service Accrual Accounts in Euro 5,686,443 5,497,741 6,489,135
---------- ---------- ----------
Total Debt Service Accrual Accounts 9,080,992 9,024,554 10,130,971
Distribution Account in US$ 8,291 0 44,489
Stockholder capital deposits 65,044 59,469 66,934
---------- ---------- ----------
Total 70,212,779 62,762,696 69,799,893
========== ========== ==========
3.2 Restricted Cash
In accordance with the Common Agreement and the Offshore Collateral Agency
Agreement, the following Reserve Account cash and letters of credit (as shown
in Note 3.4) are held by Deutsche Bank Trust Company Americas as security for
JLEC's lenders.
Major Maintenance Reserve Account in US$ 3.4 a 0 0 1,410,601
Fixed O&M Reserve Account in US$ 3.4 b 0 0 0
Debt Service Reserve Account in US$ 3.4 c 0 0 0
Super Reserve Account in US$ 3.4 d 0 0 20,913,300
---------- ---------- ----------
Off-shore Reserve Accounts in US$ 0 0 22,323,901
Fixed O&M Reserve Account in Euro 257,817 230,810 267,002
Debt Service Reserve Account in Euro 3.4 e 0 0 0
---------- ---------- ----------
Off-shore Reserve Accounts in Euro 257,817 230,810 267,002
---------- ---------- ----------
Total Reserve Accounts 257,817 230,810 22,590,902
========== ========== ==========
3.3 Total Cash
Cash 3.1 70,212,779 62,762,696 69,799,893
Restricted Cash in Reserve Accounts 3.2 257,817 230,810 22,590,902
---------- ---------- ----------
70,470,596 62,993,506 92,390,795
========== ========== ==========
3.4 Letters of Credit
Additional liquidity is available, if needed for debt service, from Sponsor (CMS
and ABB) Letters of Credit in the following accounts :
12/31/06 12/31/05 12/31/04
---------- ---------- ----------
a. Major Maintenance Reserve Account US$ 10,000,000 10,000,000 6,100,000
b. Fixed O&M Reserve Account US$ 9,600,000 9,600,000 9,600,000
c. Debt Service Reserve Account US$ 19,400,000 20,400,000 21,400,000
d. Super Reserve Account US$ 20,000,000 80,000,000 79,086,700
e. Debt Service Reserve Account Euro 25,600,000 26,800,000 28,200,000
Page 9
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
4. INVENTORIES
The inventories are detailed as follows for the year ending:
12/31/06 12/31/05 12/31/04
US$ US$ US$
---------- ---------- ----------
Stock of Coal 4.1 28,479,610 33,363,034 41,419,482
Stock of Fuel-oil 4.2 2,113,148 1,331,092 1,355,124
Stock of Spare Parts 4.3 18,790,612 16,655,779 15,386,680
Other Stocks (Chemicals, Oils,...) 517,754 593,338 1,156,676
---------- ---------- ----------
49,901,123 51,943,242 59,317,963
========== ========== ==========
4.1 The stock of coal represents the value of 233,996 tones existing in the
coal storage area plus 194,121 tones in transit to Jorf Lasfar, for a
total inventory of 428,117 tones as of December 31, 2006 (473,050 tones
total as of December 31, 2005, and 614,328 tones total as of December 31,
2004).
4.2 The stock of fuel oil represents 7,958 m3 existing in the fuel tanks as of
December 31, 2006 (6,496 m3 as of December 31, 2005, and 7,654 m3 as of
December 31, 2004).
4.3 The stock of Spare Parts represents the value of spare parts as of
December 31, 2006, that were purchased after the close-out of the Net
Investment on December 31, 2000, and remain in JLEC's inventory as of
December 31, 2006.
5. RECEIVABLES
The "Accounts Receivables" as of December 31, 2006 are detailed as follows :
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
Account Receivable - ONE 5.1 102,026,406 113,978,487 123,770,898
Account Receivable - Others 5.2 558,853 238,706 96,570
----------- ----------- -----------
102,585,259 114,217,192 123,867,468
=========== =========== ===========
5.1 The account receivable from ONE consists of November 2006 and December
2006 invoices.
5.2 The other receivables include a) accrued interest earned by investment of
JLEC's cash balances (US$ 72,068), and b) other receivable (US$ 486,785).
In addition, JLEC has invoiced AMCI a total of $8,599,483 under Coal
Supply Agreement 720, representing JLEC's excess cost of purchasing
186,244 tons of coal from a third party after AMCI failed to fulfill its
obligation to deliver 187,682 tons of coal to JLEC. AMCI has failed to pay
JLEC's invoices when due; and therefore, JLEC has called on AMCI's
performance bond of $1,500,000 and is seeking the remainder of $7,099,483
from AMCI through litigation with uncertain outcome.
6. PREPAYMENTS
The "Prepayments" as of December 31, 2006 are detailed as follows :
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
Prepayments For Income Tax - Gross 17,139,369 16,067,338 6,754,801
Income Tax Payable -16,846,482 -10,028,853 -4,568,726
----------- ----------- -----------
Prepayments for Income Tax - Net 292,887 6,038,486 2,186,076
Prepaid Insurance 455,009 513,781 524,479
Prepaid Expenses 858,860 797,072 324,949
Other Prepayments 2,996,821 586,278 353,506
----------- ----------- -----------
4,603,577 7,935,616 3,389,010
=========== =========== ===========
7. FIXED ASSETS
The "Fixed Assets" are detailed as follows for year ending :
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
Fixed Asset - Gross 25,569,527 18,494,760 16,493,623
Depreciation -10,464,051 -7,381,753 -4,753,714
Construction in Progress 2,018,136 3,767,900 418,708
----------- ----------- -----------
17,123,612 14,880,908 12,158,617
=========== =========== ===========
8. V.A.T LIABILITY
The "V.A.T Liability" account represents the net amount of Value Added Tax as
shown below :
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
Value Added Tax received from ONE to be declared 11,882,273 12,336,557 13,463,427
Value Added Tax to be paid & declared -6,480,319 -5,205,116 -15,003,302
----------- ----------- -----------
5,401,955 7,131,441 -1,539,875
=========== =========== ===========
In 2006 and 2005 the Value Added Tax (VAT) were liablities while in 2004 the VAT
was recoverable and was recorded as an asset.
9. OTHER LONG TERM ASSETS
The Other Long Term Assets are as follows :
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
Long Term Receivables from employee home mortgage loans 4,538,213 4,187,029 3,946,932
Long Term Ash Disposal Site 0 0 660,624
Major Maintenance capitalized during prior years 17,828,927 17,828,927 17,828,927
Major Maintenance capitalized during current year 0 0 0
Major Maintenance in progress - Unit 3 turbine overhaul outage 1,622,827 0 0
Less : Amortization of Major Maintenance during prior years -8,627,319 -6,097,963 -3,533,479
9.1 Less : Amortization of Major Maintenance in current year -2,529,355 -2,529,355 -2,564,485
----------- ----------- -----------
12,833,293 13,388,638 16,338,520
=========== =========== ===========
9.1 Capitalized major maintenance costs are amortized over the estimated useful
life of the investment, which for the turbine overhauls is 7 years (84
months).
Page 10
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
10. ACCOUNTS PAYABLE TO THIRD PARTIES
The "Account Payable to Third Parties" includes the main suppliers of JLEC as of
December 31, 2006 and are detailed as follows :
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ---------- -----------
ONE - Availability Rebate - Gross 17,073,431 12,260,084 15,950,384
less provisional payments to ONE -11,775,405 -7,661,363 -15,696,844
----------- ---------- -----------
ONE - Availability Rebate - Net 5,298,025 4,598,721 253,540
ONE - Fixed Reduction Rebate 199,481 8,376,603 8,687,506
----------- ---------- -----------
ONE - Total Rebates 5,497,506 12,975,324 8,941,045
Glencore 24,514,208 12,453,129 22,932,140
Bulk Trading 13,053,775 7,829,367 20,302,750
Energy Coal s.p.a. 4,484,000 0 0
Anglo Coal 0 8,738,244 0
Weglokoks 0 4,595,313 0
CARGILL 0 0 10,197,420
BHP Billiton 0 0 2,550,241
----------- ---------- -----------
Total Coal Suppliers 42,051,984 33,616,052 55,982,551
Alstom Power 2,047,091 999,252 859,588
Other suppliers 8,006,210 6,728,796 7,548,586
----------- ---------- -----------
Total 57,602,791 54,319,424 73,331,771
=========== ========== ===========
11. RELATED PARTY TRANSACTIONS
During the year 2006, JLEC has booked a number of related parties transactions
as follows :
ABB Equity
Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total
Currencies US$ MAD US$ MAD MAD US$ US$
---------- ---------- ---------- ---------- ---------- ---------- ----------
Acc. Payable 12/31/05 107,226 417,297 4,145 14,635,848 32,424,279 2,297
2006 :
Management Fees 33,605,780
Incentive Accrual 37,220,506
Services 255,361 3,897,146 397,649
Insurance Brokerage 300,000
Spare Part Purchases 1,838,306 122,603 61,456
Total Payments 2006 298,010 1,872,563 370,037 48,314,307 32,424,389 156,149
Acc. Payable 64,577 383,040 56,712 3,824,467 37,220,396 305,254
Acc. Pay. in US$ 64,577 45,160 56,712 450,897 4,388,214 305,254 5,310,814
ABB Equity Ventures, ABB Maroc and other ABB companies (such as ABB Switzerland
Ltd, ABB Power Technology, S.A., ABB Secheron S.A. and ABB Komposit) are
subsidiaries of ABB Ltd, which is the ultimate parent company of 3 JLEC
shareholders: Tre Kronor Investment AB, AB Cythere 61 and AB Cythere 63. CMS
Morocco Operating Company, Consumers Energy and CMS Generation are subsidiaries
of CMS Energy, which is the ultimate parent company of 3 JLEC shareholders: Jorf
Lasfar Energiaktiebolag, Jorf Lasfar Power Energy AB and Jorf Lasfar
Handelsbolag.
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
(see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
bolag AB AB 61 63 Total
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ------------ ----------- ----------- ----------- -------------
Acc. Payable 12/31/05 208,105,454 191,457,018 16,648,437 20,162,016 1,099,730 482,781,906 920,254,562
Dividends Declared
Payable in 2006 192,500,000 177,100,000 15,400,000 15,400,000 840,000 368,760,000 770,000,000
Total Payments 2006 151,734,463 139,595,706 12,138,757 12,138,757 662,114 290,668,054 606,937,852
Acc. Payable 248,870,991 228,961,313 19,909,679 23,423,259 1,277,616 560,873,852 1,083,316,710
B/S FX Rate MAD/USD 8.4819 8.4819 8.4819 8.4819 8.4819 8.4819 8.4819
Acc. Pay. in US$ 29,341,420 26,994,107 2,347,314 2,761,558 150,629 66,125,968 127,720,995
Preferred Stock & Convertible Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
(see Notes 16.2 & 16.3) bolag AB AB 61 63 Total
----------- ----------- ------------ ----------- ----------- ----------- -----------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ------------ ----------- ----------- ----------- -----------
Preferred Stock Dividend payable 0 0 0 0 186,316 81,861,977 82,048,293
Convertible Securities Interest payable 42,733,486 39,314,807 3,418,679 3,418,679 0 0 88,885,651
Total Payments 2006 42,733,486 39,314,807 3,418,679 3,418,679 186,316 81,861,977 170,933,944
Acc. Payable 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 8.4819 8.4819 8.4819 8.4819 8.4819 8.4819 8.4819
Acc. Pay. in US$ 0 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Accounts Payable to Related Parties 133,031,810
-----------
Page 11
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
11. RELATED PARTY TRANSACTIONS (CONTINUED)
During the year 2005, JLEC has booked a number of related parties transactions
as follows :
ABB Equity
Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total
Currencies US$ MAD US$ MAD MAD US$ US$
----------- ----------- ----------- ----------- ----------- ----------- -----------
Acc. Payable 12/31/04 90,591 861,216 43,146 9,769,277 42,344,781 2,298
2005 :
Management Fees 33,415,077
Incentive Accrual 32,424,389
Services 293,620 4,573,578 102,366
Insurance Brokerage 410,000
Spare Part Purchases 1,050,033 69,585 0
Total Payments 2005 276,985 1,493,952 518,586 33,122,084 42,344,890 102,366
Acc. Payable 107,226 417,297 4,145 14,635,848 32,424,279 2,297
Acc. Pay. in US$ 107,226 44,981 4,145 1,577,632 3,495,088 2,297 5,231,369
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
(see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
bolag AB AB 61 63 Total
----------- ----------- ----------- ----------- ----------- ------------- -------------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ----------- ----------- ----------- ------------- -------------
Acc. Payable 12/31/04 167,509,911 154,109,119 13,400,793 16,221,663 884,802 388,428,350 740,554,638
Dividends Declared Payable in 2005 220,000,000 202,400,000 17,600,000 17,600,000 960,000 421,440,000 880,000,000
Total Payments 2005 179,404,457 165,052,101 14,352,356 13,659,646 745,072 327,086,444 700,300,076
Acc. Payable 208,105,454 191,457,018 16,648,437 20,162,016 1,099,730 482,781,906 920,254,562
B/S FX Rate MAD/USD 9.277 9.277 9.277 9.277 9.277 9.277 9.277
Acc. Pay. in US$ 22,432,167 20,637,593 1,794,573 2,173,310 118,542 52,040,175 99,196,361
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Preferred Stock & Convertible Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
(see Notes 16.2 & 16.3) bolag AB AB 61 63 Total
----------- ----------- ----------- ----------- ----------- ------------- -------------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ----------- ----------- ----------- ------------- -------------
Preferred Stock Dividend payable 0 0 0 0 186,827 82,086,257 82,273,084
Convertible Securities Interest payable 42,850,564 39,422,519 3,428,045 3,428,045 0 0 89,129,174
Total Payments 2005 42,850,564 39,422,519 3,428,045 3,428,045 186,827 82,086,257 171,402,258
Acc. Payable 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 9.277 9.277 9.277 9.277 9.277 9.277 9.277
2005 : 0 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ------------- -------------
Total Accounts Payable to Related Parties 104,427,730
-------------
During the year 2004, JLEC has booked a number of related parties transactions
as follows :
ABB Equity
Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total
Currencies US$ MAD US$ MAD MAD US$ US$
----------- ----------- ----------- ----------- ----------- ----------- -----------
Acc. Payable 12/31/03 90,007 0 36,608 4,757,590 29,319,976 93,661
2004 :
Management Fees 32,195,453
Incentive Accrual 42,344,890
Services 256,323 5,066,894 3,817
Insurance Brokerage 330,000
Spare Part Purchases 1,460,976 1,077,929
Total Payments 2004 255,739 599,760 1,401,390 32,250,660 29,320,086 95,180
Acc. Payable 90,591 861,216 43,146 9,769,277 42,344,781 2,298
Acc. Pay. in US$ 90,591 104,486 43,146 1,185,247 5,137,433 2,298 6,563,201
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
(see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
bolag AB AB 61 63 Total
----------- ----------- ----------- ----------- ----------- ------------- -------------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ----------- ----------- ----------- ------------- -------------
Acc. Payable 12/31/03 214,928,711 197,734,415 17,194,297 43,438,991 2,369,384 1,040,159,631 1,515,825,428
Dividends Declared Payable in 2004 0 0 0 0 0 0 0
Total Payments 2004 47,418,800 43,625,296 3,793,504 27,217,328 1,484,582 651,731,281 775,270,790
Acc. Payable 167,509,911 154,109,119 13,400,793 16,221,663 884,802 388,428,350 740,554,638
B/S FX Rate MAD/USD 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424
Acc. Pay. in US$ 20,322,953 18,697,117 1,625,836 1,968,075 107,348 47,125,637 89,846,967
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Preferred Stock & Convertible Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
(see Notes 16.2 & 16.3) bolag AB AB 61 63 Total
----------- ----------- ----------- ----------- ----------- ------------- -------------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ----------- ----------- ----------- ------------- -------------
Preferred Stock Dividend payable 0 0 0 0 186,316 81,861,977 82,048,293
Convertible Securities Interest payable 42,733,486 39,314,807 3,418,679 3,418,679 0 0 88,885,651
Total Payments 2004 42,733,486 39,314,807 3,418,679 3,418,679 186,316 81,861,977 170,933,944
Acc. Payable 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424
Acc. Pay. in US$ 0 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ------------- -------------
Total Accounts Payable to Related Parties 96,410,168
-------------
Page 12
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
12. TAXES PAYABLE:
The "taxes payable" includes the following items as of December 31, 2006 :
12/31/06 12/31/05 12/31/04
US$ US$ US$
---------- ---------- ----------
Value Added Tax on behalf of foreign suppliers 184,035 153,030 204,712
Withholding Tax 74,772 84,894 100,984
Payroll Tax 294,099 261,044 259,164
Licence Tax 89,897 0 0
---------- ---------- ----------
Total 642,803 498,968 564,860
========== ========== ==========
13. CAPACITY CHARGES
2006
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model
----------- -----------
$ Capacity Min Lease
----------- -----------
Charges Payments Difference
----------- ----------- -----------
CGNC US GAAP US GAAP
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
$ Capacity Charges 116,223,248 114,275,391 1,947,857
$ O.N.E Rebate -16,505,389 -14,926,678 -1,578,710
----------- ----------- -----------
2006 in USD 99,717,859 99,348,712 369,146
2005 in USD -120,566
2004 in USD 44,183
-----------
$ Capacity Charges greater than $ DFL Model 292,763
-----------
Actual DFL model
------------- -----------
13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease
------------- -----------
Charges Payments Difference
------------- ----------- -----------
CGNC US GAAP US GAAP
------------- ----------- -----------
Euro Euro Euro/USD
------------- ----------- -----------
Euro Capacity Charges 98,535,329 96,789,897 1,745,432
Euro O.N.E Rebate -13,788,929 -12,446,630 -1,342,299
----------- ----------- -----------
2006 in Euro 84,746,400 84,343,267 403,133
2005 in Euro -414,029
2004 in Euro 53,499
-----------
42,603
B/S FX Rate X1.31739
-----------
Euro Capacity Charges less than Euro DFL Model in USD 56,125
-----------
2005
13.1 $ Capacity Charges less than $ DFL Model Actual DFL model
----------- -----------
$ Capacity Min Lease
----------- -----------
Charges Payments Difference
----------- ----------- -----------
CGNC US GAAP US GAAP
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
$ Capacity Charges 120,964,406 121,579,240 -614,835
$ O.N.E Rebate -22,182,641 -22,676,909 494,269
----------- ----------- -----------
2005 in USD 98,781,765 98,902,331 -120,566
2004 in USD 44,183
$ Capacity Charges less than $ DFL Model -76,383
-----------
Actual DFL model
------------- -----------
13.2 Euro Capacity Charges less than Euro DFL Model Euro Capacity Min Lease
------------- -----------
Charges Payments Difference
------------- ----------- -----------
CGNC US GAAP US GAAP
------------- ----------- -----------
Euro Euro Euro/USD
------------- ----------- -----------
Euro Capacity Charges 111,715,690 112,521,159 -805,469
Euro O.N.E Rebate -16,424,630 -16,816,070 391,441
------------ ----------- -----------
2005 in Euro 95,291,060 95,705,089 -414,029
2004 in Euro 53,499
-----------
-360,530
B/S FX Rate X1.31739
-----------
Euro Capacity Charges less than Euro DFL Model in USD -425,193
-----------
Page 13
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
13. CAPACITY CHARGES (CONTINUED)
2004
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model
----------- -----------
in November and December 2004 $ Capacity Min Lease
----------- -----------
Charges Payments Difference
----------- ----------- -----------
CGNC US GAAP US GAAP
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
$ Capacity Charges 20,705,351 20,383,548 321,803
$ O.N.E Rebate -4,302,807 -4,025,187 -277,620
----------- ----------- -----------
2004 in USD 16,402,544 16,358,361 44,183
$ Capacity Charges greater than $ DFL Model 44,183
-----------
Actual DFL model
------------- -----------
13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease
------------- -----------
in November and December 2004 Charges Payments Difference
------------- ----------- -----------
CGNC US GAAP US GAAP
------------- ----------- -----------
Euro Euro Euro/USD
------------- ----------- -----------
Euro Capacity Charges 20,032,963 19,721,611 311,353
Euro O.N.E Rebate -3,123,333 -2,865,480 -257,853
----------- ----------- -----------
2004 in Euro 16,909,630 16,856,131 53,499
B/S FX Rate X 1.36428
-----------
Euro Capacity Charges greater than Euro DFL Model in USD 72,988
-----------
14. OTHER CURRENT LIABILITIES
The "Other Current Liabilities" as of December 31, 2006 are detailed as follows:
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
Accrued Expenses: interest, swaps and fees 14.1 4,160,625 4,516,665 5,726,546
Accrued salaries expense 2,074,895 1,538,372 2,075,391
Liability for Compensated Absences 364,155 319,280 310,222
Coal Custom Duty Advances from ONE 598,871 554,771 671,924
Current Deferred Tax 320,512 155,503 0
Other Liabilities 433,846 242,786 578,504
----------- ----------- -----------
7,952,904 7,327,377 9,362,588
=========== =========== ===========
14.1 The accrued interests and fee expenses are detailed by loans as follows:
12/31/06 12/31/05 12/31/04
US$ US$ US$
----------- ----------- -----------
OPIC 492,202 570,954 648,818
SACE 1,168,756 1,213,676 1,597,674
WB 1,162,394 1,208,062 1,708,747
US EXIM 1,111,953 1,289,865 1,467,777
ERG 225,320 234,107 303,531
----------- ----------- -----------
4,160,625 4,516,665 5,726,547
=========== =========== ===========
Page 14
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
15. LONG TERM LOANS
Long term loans are detailed as follows as of December 31, 2006 :
Interest Reimbursement
Borrowing Principal ----------------- Interest --------------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ----------- -------- -------- ----------- ----- ------- --------- ------------- -----------
US EXIM 9/12/02 US$ 122,543,082 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 31,510,417 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 6,875,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly
-----------
38,385,417
-----------
Total L.T loan in US$ 160,928,499
-----------
Current part in USD 25,748,559
-----------
Non-Current part in USD 135,179,940
-----------
Interest Reimbursement
Rollover Principal ---------------------- Interest -----------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---------- -------- -------- ----------- -------- ------- --------- ------------- -----------
SACE 11/15/06 Euro 121,170,898 Fixed 5.73000% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/06 Euro 15,571,581 Variable 5.71213% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/06 Euro 83,351,228 Variable 5.46213% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 220,093,707
-----------
B/S FX Rate Euro/USD 1.31739
-----------
Total L.T loan in USD 289,950,021
-----------
Current part in USD 46,392,003
-----------
Non-Current part in USD 243,558,018
-----------
</Table>
Total principal repayments for the next five years are detailed below. Forecasts
of interest payments, interest-rate swap payments and guarantee fees are also
shown below . For further information regarding swaps, see Note 20.
Remaining Remaining Remaining
Principal Principal Principal Principal Principal Interest Swap Guarantee
Repayment in Repayment in Repayment in Repayment in Repayment in Payments Payments Fees
2007 2008 2009 2010 2011 2007-2013 2007-2013 2007-2013
------------ ------------ ------------ ------------ ------------ --------- ---------- ---------
In USD
US EXIM 19,606,893 19,606,893 19,606,893 19,606,893 19,606,893 28,701,913 0 0
OPIC A 5,041,666 5,041,666 5,041,666 5,041,666 5,041,666 10,474,229 0 0
OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 2,216,035 0 0
------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
Total in USD 25,748,559 25,748,559 25,748,559 25,748,559 25,748,559 41,392,178 0 0
------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
In Euro
SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 22,899,862 0 0
ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 2,933,666 1,481,014 0
WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 15,014,978 7,764,435 2,429,318
Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 40,848,505 9,245,449 2,429,318
B/S FX Rate Euro/USD 1.31739 1.31739 1.31739 1.31739 1.31739 1.31739 1.31739 1.31739
------------ ------------ ------------ ------------ ------------ ---------- ----------- ---------
Total in USD 46,392,003 46,392,003 46,392,003 46,392,003 46,392,003 53,813,556 12,179,894 3,200,368
------------ ------------ ------------ ------------ ------------ ---------- ----------- ---------
Page 15
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
15. LONG TERM LOANS (CONTINUED)
Long term loans are detailed as follows as of December 31, 2005 :
Interest Reimbursement
Borrowing Principal ------------------- Interest -----------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ----------- --------- -------- ----------- ----- ------- --------- ------------- -----------
US EXIM 9/12/02 US$ 142,149,976 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 36,552,083 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 7,975,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly
-----------
44,527,083
-----------
Total L.T loan in US$ 186,677,059
-----------
Current part in USD 25,748,559
-----------
Non-Current part in USD 160,928,500
-----------
Interest Reimbursement
Rollover Principal --------------------- Interest ----------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---------- -------- -------- ----------- -------- ------- --------- ------------- -----------
SACE 11/15/05 Euro 140,558,242 Fixed 5.73000% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/05 Euro 18,063,034 Variable 4.44763% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/05 Euro 96,687,425 Variable 4.19763% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 255,308,700
-----------
B/S FX Rate Euro/USD 1.17936
-----------
Total L.T loan in USD 301,099,750
-----------
Current part in USD 41,531,000
-----------
Non-Current part in USD 259,568,750
-----------
Long term loans are detailed as follows as of December 31, 2004 :
Interest Reimbursement
Borrowing Principal ------------------ Interest -----------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---------- --------- -------- ----------- ----- ------- --------- ------------- -----------
US EXIM 9/12/02 US$ 161,756,869 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 41,593,750 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 9,075,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly
-----------
50,668,750
-----------
Total L.T loan in US$ 212,425,619
-----------
Current part in USD 25,748,559
-----------
Non-Current part in USD 186,677,060
-----------
Interest Reimbursement
Rollover Principal ------------------- Interest -------------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---------- -------- -------- ----------- -------- ------- --------- ------------ -----------
SACE 11/15/04 Euro 159,945,585 Fixed 5.7300% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/04 Euro 20,554,486 Variable 4.17013% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/04 Euro 110,023,622 Variable 3.9201% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 290,523,693
-----------
B/S FX Rate Euro/USD 1.36429
-----------
Total L.T loan in USD 396,357,727
-----------
Current part in USD 48,043,360
-----------
Non-Current part in USD 348,314,367
-----------
Page 16
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
15. LONG TERM LOANS (CONTINUED)
PLEDGE OF STOCK AND OTHER ASSETS
As security for the repayment of the loans, and the payment of all related
interest, fees and swap obligations, JLEC and its stockholders have entered into
various pledge agreements with Deutsche Bank Trust Company Americas, as Offshore
Collateral Agent, and with Banque Marocaine pour le Commerce et l'Industrie, as
Onshore Collateral Agent, for the benefit of such lenders and other secured
parties. Such security shall continue in effect until the repayment in full of
all outstanding principal amounts and the payment in full of all related
interest, fee and swap obligations, which is scheduled to occur in February of
2013. The principle pledge agreements are:
1. The Stockholder Pledge and Security Agreements, in which each of JLEC's
stockholders pledges all of its shares, claims, rights and interests in JLEC to
the Offshore Collateral Agent.
2. The Security and Assignment Agreement, in which JLEC assigns to the Offshore
Collateral Agent a security interest in all of JLEC's rights, title and interest
in the following collateral, among others:
a. all of JLEC's contractual rights,
b. all rents, profits, income and revenues derived by JLEC from its ownership of
the Project,
c. all cash deposits and other assets in any of JLEC's accounts with financial
institutions,
d. all permits, licenses and other governmental authorizations obtained by JLEC
in connection with its ownership of the Project,
e. all of JLEC's insurance policies and related claims and proceeds, and
f. all personal property and inventories of JLEC.
3. The Agreement for Pledge of Shares, in which each of JLEC's stockholders
pledges all of its shares, claims, rights and interests in JLEC to the Onshore
Collateral Agent, and assigns to the Onshore Collateral Agent the direct payment
by JLEC of all dividends and other stockholder distributions if and whenever a
Default has occurred and is continuing.
4. The General Delegation of Contract Claims, in which JLEC assigns to the
Onshore Collateral Agent the direct payment of any and all contract claims due
to JLEC if and whenever a Default has occurred and is continuing.
5. The Pledge over General Operating Accounts, in which JLEC pledges to the
Onshore Collateral Agent any and all monies in JLEC's accounts with the Onshore
Collateral Agent.
6. The Master Agreement for Assignment of Accounts Receivable as Security, in
which JLEC assigns to the Onshore Collateral Agent a security interest in all of
the accounts receivable payable by ONE to JLEC under the Power Purchase
Agreement.
COVENANTS
The covenants on the loans also place restrictions on JLEC's payment of
dividends and other distributions to JLEC's stockholders. Specifically, JLEC may
not:
1. Pay any dividends to its stockholders, or
2. Make any distribution, payment or delivery of property or cash to its
stockholders, or
3. Redeem, retire, purchase or otherwise acquire any shares of its
capital stock, or
4. Purchase or redeem any subordinated debt
except on quarterly repayment dates and only then after first satisfying all
debt service obligations and satisfying all of the following conditions, among
others:
a. No default shall have occurred,
b. The total of cash and letters of credit in all JLEC reserve accounts
shall equal or exceed required levels,
c. JLEC's actual debt service coverage ratios for the current quarter and
preceding four quarters have all been greater than 1.3, and
d. JLEC's forecasted debt service coverage ratios for the next succeeding
two quarters are greater than 1.3.
JLEC has complied with these covenants since May 2001, when the loans began to
be repaid.
Page 17
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
16. STOCKHOLDERS' EQUITY
16.1 COMMON STOCK AS OF DECEMBER 31, 2006, 2005, AND 2004
Common Stock
-------------------------------------------------
Type of Number Par value Par value
Stockholders Partner of Shares Dirham US Dollar
----------------------- ----------- --------- --------- ---------
Jorf Lasfar Handelsbolag, Sweden............................. CMS General 110 11,000 1,155
Jorf Lasfar Energiaktiebolag, Sweden......................... CMS Limited 1,375 137,500 14,443
Jorf Lasfar Power Energy AB, Sweden.......................... CMS Limited 1,265 126,500 13,288
Tre Kronor Investment AB, Sweden............................ ABB General 110 11,000 1,155
AB Cythere 63, Sweden........................................ ABB Limited 2,634 263,400 27,668
AB Cythere 61, Sweden........................................ ABB Limited 6 600 63
----------- --------- --------- ---------
Total 5,500 550,000 57,773
16.2 CONVERTIBLE STOCKHOLDERS' SECURITIES AS OF DECEMBER 31, 2006, 2005,
AND 2004
On December 11, 2000, the JLEC stockholders purchased 100% of all Company Loan
Notes for $ 387,355,000, and amended the Company Loan Agreement to make such
stockholder securities convertible into Preferred Stock or Common Stock. On
January 1, 2001, the convertible securities (Company Loan Principal) held by AB
Cythere 61 and AB Cythere 63 were converted into Preferred Stock as shown below
on Note 16.3 . Such conversions shall be made into a fixed number of JLEC shares
as listed below:
Type of Number Par value Par value
Stockholders Partner of Shares Dirham US Dollar
---------------- ----------- ---------- ------------- -----------
Jorf Lasfar Handelsbolag, Sweden............................. CMS General 842,962 84,296,200 7,747,100
Jorf Lasfar Energiaktiebolag, Sweden......................... CMS Limited 10,537,024 1,053,702,400 96,838,750
Jorf Lasfar Power Energy AB, Sweden.......................... CMS Limited 9,694,062 969,406,200 89,091,650
Tre Kronor Investment AB, Sweden............................ ABB General 842,962 84,296,200 7,747,100
AB Cythere 63, Sweden........................................ ABB Limited 0 0 0
AB Cythere 61, Sweden........................................ ABB Limited 0 0 0
----------- ---------- ------------- -----------
Total 21,917,010 2,191,701,000 201,424,600
Under the terms of the amended Company Loan Agreement summarized below, these
convertible securities constitute a hybrid instrument which is dealt with in
accordance with the substance of the transaction, i.e. as a Preferred Stock
equivalent:
(a) Expression of the Loan in MAD
The outstanding USD 201,424,600 principal amount is expressed as MAD
2,191,701,000 for the purpose of computing interest and principal payments due
under this Agreement. However, interest and principal payments will be paid to
the stockholders in USD, provided that the Company is not responsible for any
losses realized by the stockholders resulting from the depreciation of the value
of the MAD relative to the USD.
(b) Repayment or conversion into Stock
Under the terms of the amended Agreement:
- - the Security may only be repaid, in whole or in part, at the Company's option;
- - the part of the Security principal held by other Company Lenders listed above
may be converted into Common Stock at any time, using the same conversion ratio
used for the conversion of the parts of AB Cythere 61 and AB Cythere 63;
- - the shares of Preferred Stock issued to AB Cythere 61 and AB Cythere 63 may be
converted into Common Stock. In this case, all outstanding Security principal
held by other Company Lenders will be mandatorily converted into Common Stock at
the same conversion ratio.
(c) Interest payment and accruals as Retained Earning
In accordance with Amendment N degrees.2, the Company will pay interest on the
unpaid principal amount once per year, at the interest rate per annum equal to
the greater of (1) the Moroccan maximum deductible rate, and (2) 4.00%. The
applicable interest rate for 2006 was 4.00% (4.00% in 2005 and 4.00% in 2004).
Accruals for such interest payments are reported as part of the Retained Earning
allocation in Note 16.4, and are not expensed.
Page 18
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
16.3 PREFERRED STOCK AS OF DECEMBER 31, 2006, 2005, AND 2004
In accordance with Section 3.01 par.(b) of the amended Company Loan Agreement
(see note 16.2 above), the Company has converted on January 1, 2001, all
outstanding Company Loan principal held by AB Cythere 61 and AB Cythere 63, at
the conversion ratio of one (1) share of Preferred Stock for each one hundred
(100) MAD of such Company Loan principal converted into Preferred Stock, as
follows :
Preferred Stock
----------------------------------------------------
Type of Number Par value Par value
Stockholders Partner of Shares Dirham US Dollar
-------------- ----------- ---------- ------------- -----------
Jorf Lasfar Handelsbolag, Sweden ................. CMS General 0 0 0
Jorf Lasfar Energiaktiebolag, Sweden ............. CMS Limited 0 0 0
Jorf Lasfar Power Energy AB, Sweden .............. CMS Limited 0 0 0
Tre Kronor Investment AB, Sweden ................ ABB General 0 0 0
AB Cythere 63, Sweden ............................ ABB Limited 20,185,145 2,018,514,500 185,508,183
AB Cythere 61, Sweden ............................ ABB Limited 45,941 4,594,100 422,217
----------- ---------- ------------- -----------
Total 20,231,086 2,023,108,600 185,930,400
Such shares are non-participating voting shares of convertible Preferred Stock
of the Company, and :
- - are convertible at any moment into shares of Common Stock;
- - give right to the collection of a minimum priority dividend, at least equal to
4% of the aggregate par value of the preferred shares,
- - do not participate in the distribution of the remaining balance of Retained
Earning, which is divided among the shares of Common Stock as shown in
Note 16.4.
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS
2006 US$
------ -----------
Retained Earnings as of December 31, 2005 246,770,905
Retained Earnings increase during 2006 109,230,917
Retained Earnings decrease during 2006
Convertible Securities interest payable as of January 1, 2006 -9,581,189
88,885,652 Dirhams ( at 9.2771 Dirhams per US Dollar)
Preferred Stock Dividend payable as of March 15, 2006 -8,981,357
82,048,293 Dirhams ( at 9.1354 Dirhams per US Dollar)
Common Stock Dividends payable as of March 15, 2006 -36,123,213
5,500 Common Stock Shares
60,000 Dirhams per share
330,000,000 Dirhams
9.1354 Dirhams per US Dollar on March 15, 2006
Common Stock Dividends payable as of August 31, 2006 -50,831,793
5,500 Common Stock Shares
80,000 Dirhams per share
440,000,000 Dirhams
8.6560 Dirhams per US Dollar on August 31, 2006
-----------
Total Retained Earnings 250,484,269
The Retained Earnings are allocated among the stockholders as follows :
Common
Convertible Securities Preferred Stock Stock Total
--------------- ---------------------- ----------------------- -----------------------
Stockholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
-------------- --------------- ---------- ---------- ---------- ---------- ---------- -----------
Jorf Lasfar Handelsbolag, Sweden ...... CMS General 3,418,679 403,056 0 0 4,606,630 5,009,685
Jorf Lasfar Energiaktiebolag, Sweden .. CMS Limited 42,733,486 5,038,197 0 0 57,582,870 62,621,067
Jorf Lasfar Power Energy AB, Sweden ... CMS Limited 39,314,807 4,635,142 0 0 52,976,240 57,611,382
Tre Kronor Investment AB, Sweden ..... ABB General 3,418,679 403,056 0 0 4,606,630 5,009,685
AB Cythere 63, Sweden ................. ABB Limited 0 0 81,861,977 9,651,373 110,307,839 119,959,212
AB Cythere 61, Sweden ................. ABB Limited 0 0 186,316 21,966 251,271 273,237
---------- ---------- ---------- ---------- ----------- -----------
Total 88,885,652 10,479,451 82,048,293 9,673,339 230,331,480 250,484,269
The allocations for Convertible Securities (88,885,652 Dirhams) and Preferred
Stock (82,084,293 Dirhams) are scheduled for payment on May 15, 2007.
Page 19
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS (CONTINUED)
2005
Retained Earnings as of December 31, 2004 253,215,661
Retained Earnings increase during 2005 111,561,388
Retained Earnings decrease during 2005
Convertible Securities interest payable as of January 1, 2005 -10,813,498
89,129,174 Dirhams ( at 8.2424 Dirhams per US Dollar)
Preferred Stock Dividend payable as of March 31, 2005 -9,585,139
82,273,084 Dirhams ( at 8.5834 Dirhams per US Dollar)
Common Stock Dividends payable as of August 31, 2005 -97,607,507
5,500 Common Stock Shares
160,000 Dirhams per share
880,000,000 Dirhams
9.0157 Dirhams per US Dollar on August
31, 2005
-----------
246,770,905
The Retained Earnings are allocated among the shareholders as follows :
Common
Convertible Securities Preferred Stock Stock Total
--------------- ---------------------- ---------------------- ----------- -----------
Shareholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
-------------- --------------- ---------- ---------- ---------- ---------- ----------- -----------
Jorf Lasfar Handelsbolag, Sweden ...... CMS General 3,418,679 368,507 0 0 4,566,911 4,935,418
Jorf Lasfar Energiaktiebolag, Sweden .. CMS Limited 42,733,486 4,606,341 0 0 57,086,385 61,692,726
Jorf Lasfar Power Energy AB, Sweden ... CMS Limited 39,314,807 4,237,834 0 0 52,519,474 56,757,308
Tre Kronor Investment AB, Sweden ..... ABB General 3,418,679 368,507 0 0 4,566,911 4,935,418
AB Cythere 63, Sweden ................. ABB Limited 0 0 81,861,977 8,824,091 109,356,755 118,180,847
AB Cythere 61, Sweden ................. ABB Limited 0 0 186,316 20,083 249,104 269,188
---------- ---------- ---------- ---------- ----------- -----------
Total 88,885,652 9,581,189 82,048,293 8,844,175 228,345,541 246,770,905
US$
-----------
2004
Retained Earnings as of December 31, 2003 147,498,955
Retained Earnings increase during 2004 125,193,694
Retained Earnings decrease during 2004
Convertible Securities interest payable as of January 1, 2004 -10,128,034
88,885,651 Dirhams ( at 8.7762 Dirhams per US Dollar)
Preferred Stock Dividend payable as of January 1, 2004 -9,348,954
82,048,293 Dirhams ( at 8.7762 Dirhams per US Dollar)
-----------
Total Retained Earnings 253,215,661
The Retained Earnings are allocated among the shareholders as follows :
Common
Convertible Securities Preferred Stock Stock Total
--------------- ---------------------- ---------------------- ----------- -----------
Shareholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
------------- --------------- ---------- ---------- ---------- ---------- ----------- -----------
Jorf Lasfar Handelsbolag, Sweden ....... CMS General 3,428,045 415,904 0 0 4,648,409 5,064,313
Jorf Lasfar Energiaktiebolag, Sweden ... CMS Limited 42,850,564 5,198,797 0 0 58,105,118 63,303,915
Jorf Lasfar Power Energy AB, Sweden .... CMS Limited 39,422,519 4,782,893 0 0 53,456,709 58,239,602
Tre Kronor Investment AB, Sweden ...... ABB General 3,428,045 415,904 0 0 4,648,409 5,064,313
AB Cythere 63, Sweden .................. ABB Limited 0 0 82,086,256 9,959,024 111,308,278 121,267,301
AB Cythere 61, Sweden .................. ABB Limited 0 0 186,827 22,667 253,550 276,216
---------- ---------- ---------- ---------- ----------- -----------
Total 89,129,174 10,813,498 82,273,083 9,981,690 232,420,473 253,215,661
Page 20
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
17. DIRECT FINANCING LEASE - (D.F.L)
As explained in Note 2b, JLEC is using the Direct Financing Lease methodology.
Specific accounts were created to reflect this method. These accounts are
detailed below .
Direct Financing Lease - (D.F.L) as of December 31, 2006
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2006
US$ Euro
------------- -------------
Units 1 to 4 Units 1 to 4
------------- -------------
Total Minimum Lease Payments 1,985,555,329 942,548,476
Minimum Lease Payments for 2006 -99,348,714 -84,343,213
------------- -------------
Total of Future Minimum Lease Payments 1,886,206,615 858,205,263
X 1.31739
------------- -------------
Total of Future Minimum Lease Payments in US$ 17.3 1,886,206,615 1,130,594,042
============= =============
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
-------------- --------------
Year Units 1 to 4 Units 1 to 4
- ------ -------------- --------------
2007 94,266,264 83,270,646
2008 97,990,818 79,557,495
2009 97,756,285 76,945,799
2010 91,054,494 80,225,551
2011 89,964,329 80,077,904
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2006
US$ Euro
------------- ------------
Units 1 to 4 Units 1 to 4
------------- ------------
Total Unearned Income 1,328,832,663 621,654,606
----------
Lease Revenue 2006 -87,703,730 -71,512,795 X 1.26479 90,448,992
------------- ------------ ----------
1,241,128,933 550,141,811
X 1.31739
------------- ------------
Total Remaining Unearned Income in US$ 17.3 1,241,128,933 724,753,251
============= ============
The Lease Revenues under the US GAAP model for the next five years are as
follows:
US$ Euro
------------ ------------
Year Units 1 to 4 Units 1 to 4
- ------ ------------ ------------
2007 86,501,207 68,270,588
2008 85,143,123 64,820,922
2009 83,150,426 61,693,606
2010 81,563,514 57,390,062
2011 80,348,582 51,534,513
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2006
US$ Euro
-------------- -------------
Units 1 to 4 Units 1 to 4
-------------- -------------
Total of Future Minimum Lease Payments in US$ 17.1 1,886,206,615 1,130,594,042
Total Remaining Unearned Income in US$ 17.2 -1,241,128,933 -724,753,251
-------------- -------------
Net investment in direct financing leases in US$ 645,077,682 405,840,792
============== =============
Current part in US$ 7,765,057 19,760,979
Non-Current part in US$ 637,312,625 386,079,813
Page 21
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
Direct Financing Lease - (D.F.L) as of December 31, 2005
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2005
US$ Euro
------------- -------------
Units 1 to 4 Units 1 to 4
------------- -------------
Total Minimum Lease Payments 2,084,457,657 1,038,253,560
Minimum Lease Payments for 2005 -98,902,328 -95,705,084
------------- -------------
Total of Future Minimum Lease Payments 1,985,555,329 942,548,476
X 1.17936
------------- -------------
Total of Future Minimum Lease Payments in US$ 17.3 1,985,555,329 1,111,599,840
============= =============
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
------------ ------------
Year Units 1 to 4 Units 1 to 4
- ------------- ------------ ------------
2006 99,348,712 84,343,267
2007 94,266,264 83,270,646
2008 97,990,818 79,557,495
2009 97,756,285 76,945,799
2010 91,054,494 80,225,551
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2005
US$ Euro
------------- ------------
Units 1 to 4 Units 1 to 4
------------- ------------
Total Unearned Income 1,418,090,734 696,642,515
-----------
Lease Revenue 2005 -89,258,071 -74,987,909 X 1.23840 92,865,318
------------- ------------ -----------
1,328,832,663 621,654,606
X 1.17936
------------- ------------
Total Remaining Unearned Income in US$ 17.3 1,328,832,663 733,151,852
============= ============
The Lease Revenues under the US GAAP model for the next five years are as
follows:
US$ Euro
------------ ------------
Year Units 1 to 4 Units 1 to 4
- ------ ------------ ------------
2006 87,703,727 71,512,790
2007 86,501,207 68,270,588
2008 85,143,123 64,820,922
2009 83,150,426 61,693,606
2010 81,563,514 57,390,062
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2005
US$ Euro
-------------- --------------
Units 1 to 4 Units 1 to 4
-------------- --------------
Total of Future Minimum Lease Payments in US$ 17.1 1,985,555,329 1,111,599,840
Total Remaining Unearned Income in US$ 17.2 -1,328,832,663 -733,151,852
-------------- --------------
Net investment in direct financing leases in US$ 656,722,666 378,447,988
============== ==============
Current part in US$ 11,644,985 15,131,695
Non-Current part in US$ 645,077,681 363,316,293
Page 22
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
Direct Financing Lease - (D.F.L) as of December 31, 2004
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2004
US$ Euro
------------- -------------
Units 1 to 4 Units 1 to 4
------------- -------------
Total Minimum Lease Payments 17.4 2,197,963,436 1,152,862,047
Minimum Lease Payments for 2004 -113,505,779 -114,608,487
------------- -------------
Total of Future Minimum Lease Payments 2,084,457,657 1,038,253,560
X 1.36428
------------- -------------
Total of Future Minimum Lease Payments in US$ 17.3 2,084,457,657 1,416,475,939
============= =============
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
------------ ------------
Year Units 1 to 4 Units 1 to 4
- ------ ------------ ------------
2005 98,902,331 95,705,089
2006 99,348,712 84,343,267
2007 94,266,264 83,270,646
2008 97,990,818 79,557,495
2009 97,756,285 76,945,799
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2004
US$ Euro
------------- ------------
Units 1 to 4 Units 1 to 4
------------- ------------
Total Unearned Income 17.4 1,498,566,597 780,404,581
-----------
Lease Revenue 2004 -80,475,863 -83,762,066 X 1.24254 104,077,762
-------------- ------------ -----------
1,418,090,734 696,642,515
-------------- ------------
X 1.36428
-------------- ------------
Total Remaining Unearned Income in US$ 17.3 1,418,090,734 950,420,397
============== ============
The Lease Revenues under the US GAAP model for the next five years are as
follows:
US$ Euro
------------ ------------
Year Units 1 to 4 Units 1 to 4
- ------ ------------ ------------
2005 89,258,072 74,987,906
2006 87,703,727 71,512,790
2007 86,501,207 68,270,588
2008 85,143,123 64,820,922
2009 83,150,426 61,693,606
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2004
US$ Euro
-------------- --------------
Units 1 to 4 Units 1 to 4
-------------- --------------
Total of Future Minimum Lease Payments in US$ 17.1 2,084,457,657 1,416,475,939
Total Remaining Unearned Income in US$ 17.2 -1,418,090,734 -950,420,397
-------------- --------------
Net investment in direct financing leases in US$ 666,366,923 466,055,542
============== ==============
Current part in US$ 9,644,259 28,264,185
Non-Current part in US$ 656,722,664 437,791,357
17.4 On November 8, 2004, Amendment No. 2 to the Power Purchase Agreement became
effective, and JLEC updated our Direct Finance Lease models including an
extension of such DFL models by 15 years until September 13, 2027. As a
result, starting from January 1, 2004, the total minimum lease payments
have increased from $1,181,954,019 to $2,197,963,436 and from Euro
834,803,410 to Euro 1,152,862,047. Likewise, JLEC's total unearned income
under the updated and extended DFL models increased from $505,489,540 to
$1,498,566,597 and from Euro 477,010,214 to Euro 780,404,581.
Page 23
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
18. FINANCIAL EXPENSES
12/31/06 12/31/05 12/31/04
US$ US$ US$
------------ ------------ ------------
The Financial Expenses are detailed as follows, for the year ending:
Interest, Fees and Swaps incurred from inception to the year ending:
Up-Front Fees 25,609,073 25,609,073 25,609,073
Interest Costs 388,369,011 358,167,574 324,780,552
Premiums 23,808,481 23,808,481 23,808,481
Commitment Fees 19,312,672 19,312,672 19,312,672
Arrangement Fees 2,396,273 2,396,273 2,396,273
Other Fees (acceptance fees, Agent fees...etc) 10,887,119 10,393,398 10,240,839
Guarantee Fees 24,229,405 23,141,044 22,035,847
Swaps 56,716,404 51,622,612 44,896,300
------------ ------------ ------------
551,328,438 514,451,127 473,080,038
Accrued Interest, Fees, Swaps (see Note 14.1) 4,160,625 4,516,665 5,726,546
------------ ------------ ------------
Total Interest, Fees and Swaps 555,489,063 518,967,792 478,806,584
------------ ------------ ------------
Interest, fees and swaps capitalized as part of the project
construction for Units 3&4 -210,949,363 -210,949,363 -210,949,363
------------ ------------ ------------
Interest, fees and swaps expensed - Total 344,539,700 308,018,429 267,857,221
Interest, fees and swaps expensed during prior years -308,018,429 -267,857,221 -220,964,202
------------ ------------ ------------
Interest, fees and swaps expensed during current year 36,521,271 40,161,208 46,893,019
============ ============ ============
19. POSTEMPLOYMENT BENEFITS
JLEC contributes to two pension plans as described in Notes 19.1 and 19.2.
JLEC's obligations for retiree health care insurance and other postemployment
costs are described in Note 19.3
19.1 CAISSE DE DEPOT ET DE GESTION (CDG)
On December 23, 2005, JLEC entered into a Pension Plan Transfer Agreement with
the CDG and its affiliates called RCAR and CNRA. In accordance with the terms of
this Transfer Agreement, JLEC made a total, one-time payment of MAD 175,149,622
(USD 18,957,844) to the RCAR and CNRA to fully fund the pension plan covering
most (252 of 322) of JLEC's employees, and transferred the administration,
actuarial risk and investment return risk of this pension plan to the
CDG/RCAR/CNRA. Further, this Pension Plan Transfer Agreement defines JLEC's
future contributions to the RCAR for such pension plan to be equal to 18.00% of
the compensation of each participating employee. Such future contributions will
be expensed by JLEC in the period for which they are due. As a result of the
Transfer Agreement and payment described above, JLEC's unfunded pension
liability is zero as of December 31, 2006, compared with zero as of December 31,
2005, and USD 11,524,374 as of December 31, 2004. JLEC estimates our 2007
contributions will be USD 447,498.
19.2 CAISSE INTERPROFESSIONNELLE MAROCAINE DE RETRAITES (CIMR)
Employees of JLEC not covered by the pension plan described in Note 19.1
participate in a pension fund called CIMR, to which JLEC contributes an amount
equal to 7.58 percent of the employee's gross pay ( 7.32% in 2005, and 7.08% in
2004 ). This fund is carried in the employee's name, and the future pension
benefits an employee will receive depend only on the amount contributed to his
account and the returns earned on the investment of those contributions. JLEC's
contributions to the CIMR pension fund are expensed by JLEC in the period for
which they are due. In 2006, JLEC's contributions to the CIMR pension fund
amounted to USD 220,674, compared with USD 208,088 in 2005, and USD 173,073 in
2004. JLEC estimates our 2007 contributions will be USD 229,392
19.3 POSTEMPLOYMENT OBLIGATIONS
For those 252 employees described in Note 19.1, JLEC retains an obligation for
certain postemployment benefits consisting of a 2/3 share of retiree health
insurance premiums and reimbursement of retiree electrical charges. Such
insurance premiums are forecast to trend higher in the future at a rate of 6.50%
per year; provided, however, that JLEC's contribution for each retiree's health
insurance is capped at 7,039 Dirhams ($ 782) per year for a typical family of
four. Using data as of September 30, 2005, Deloitte & Touche prepared an
actuarial forecast of JLEC's postemployment obligations and determined that the
present value at a 6.00% discount rate of such JLEC obligations amounted to USD
2,321,661 as of December 31, 2006. This compares with USD 2,020,119 as of
December 31, 2005, and USD 2,257,713 as of December 31, 2004. JLEC recognizes
such actuarial gains and losses directly in current period Income Before Tax.
JLEC estimates our future payments for such postemployment benefits will be as
follows:
Page 24
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
20. DERIVATIVE INSTRUMENT LIABILITY / OTHER COMPREHENSIVE INCOME
JLEC adopted SFAS N degrees. 133 on January 1, 2001. This standard requires JLEC
to recognize at fair value on the balance sheet, as assets or liabilities, all
contracts that meet the definition of a derivative instrument. Details of all
JLEC derivative instruments (interest rate swaps) are provided in the following
tables as of December 31, 2006, 2005 and 2004, and all such swaps qualify with
100% effectiveness as cash flow hedge for JLEC's variable interest rate loans.
Therefore, in accordance with SFAS N degrees. 133, the changes in fair value of
these interest rate swaps are reflected directly in Stockholders' Equity under
"Other Comprehensive Income or (Loss)". JLEC determines fair value based upon
market price estimations provided by the swap providers. JLEC estimates that our
swap expenses in 2007 will be USD 3,472,665.
2006
Fixed Rate Current Current Settlement Forecast of Net
Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro
- ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ------------ ----------
World Bank BNP Euro 6.4115% 3.58713% 27,783,743 Quarterly 2/15/2013 2,587,992 1,968,395
ABN Euro 6.4175% 3.58713% 27,783,743 Quarterly 2/15/2013 2,593,490 1,952,968
CSFB Euro 6.4060% 3.58713% 27,783,743 Quarterly 2/15/2013 2,582,953 1,900,870
---------- --------- ---------
83,351,228 7,764,435 5,822,234
ERG BNP Euro 6.4700% 3.58713% 5,190,527 Quarterly 2/15/2013 493,500 376,491
ABN Euro 6.4750% 3.58713% 5,190,527 Quarterly 2/15/2013 494,356 373,460
CSFB Euro 6.4680% 3.58713% 5,190,527 Quarterly 2/15/2013 493,158 365,706
---------- --------- ---------
15,571,581 1,481,014 1,115,657
Total in Euro 6,937,891
---------
B/S FX rate X 1.31739
Total in USD 9,139,933
=========
2005
Fixed Rate Current Current Settlement Forecast of
Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro
- ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ----------- ----------
World Bank BNP Euro 6.4115% 2.31813% 32,229,142 Quarterly 2/15/2013 5,018,993 3,633,143
ABN Euro 6.4175% 2.31813% 32,229,142 Quarterly 2/15/2013 5,026,350 3,651,524
CSFB Euro 6.4060% 2.31813% 32,229,142 Quarterly 2/15/2013 5,012,250 3,476,765
----------- ---------- ----------
96,687,425 15,057,593 10,761,432
ERG BNP Euro 6.4700% 2.31813% 6,021,011 Quarterly 2/15/2013 951,043 690,620
ABN Euro 6.4750% 2.31813% 6,021,011 Quarterly 2/15/2013 952,188 693,891
CSFB Euro 6.4680% 2.31813% 6,021,011 Quarterly 2/15/2013 950,585 663,435
---------- ---------- ---------
18,063,034 2,853,816 2,047,947
Total in Euro 12,809,379
----------
B/S FX rate X 1.17936
Total in USD 15,106,813
==========
2004
Fixed Rate Current Current Settlement Forecast of
Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro
- ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ----------- ----------
World Bank BNP Euro 6.4115% 2.17025% 36,674,540 Quarterly 2/15/2013 6,705,625 4,867,269
ABN Euro 6.4175% 2.17025% 36,674,540 Quarterly 2/15/2013 6,715,112 4,857,758
CSFB Euro 6.4060% 2.17025% 36,674,540 Quarterly 2/15/2013 6,696,930 4,681,464
----------- ---------- ----------
110,023,620 20,117,667 14,406,491
ERG BNP Euro 6.4700% 2.17025% 6,851,496 Quarterly 2/15/2013 1,270,016 925,233
ABN Euro 6.4750% 2.17025% 6,851,496 Quarterly 2/15/2013 1,271,493 923,161
CSFB Euro 6.4680% 2.17025% 6,851,496 Quarterly 2/15/2013 1,269,426 930,588
---------- ---------- ----------
20,554,488 3,810,935 2,778,982
Total in Euro 17,185,473
----------
B/S FX rate X 1.36429
Total in USD 23,445,919
==========
Page 25
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
21. CASH FLOWS FOR 2006
Reconciliation of net income to net cash from operating activities under the
Direct Method is as follows :
2006 2005 2004
US$ US$ US$
----------- ----------- -----------
Net Income .......................................................... 109,230,917 111,561,388 125,193,694
Adjustment to reconcile Net Income to cash
provided from operating activities :
Depreciation and amortization .............................. 5,694,225 5,844,911 5,530,445
Deferred taxes ............................................. 8,703,051 5,057,003 (1,555,763)
Lease Revenue .............................................. (178,152,722) (182,123,389) (184,553,625)
Finance tariff cash revenue ................................ 204,125,087 216,790,731 213,372,941
Changes in operating assets and liabilities:
Inventories ........................................... 2,042,119 7,374,721 (20,769,958)
Accounts receivable ................................... 11,631,934 9,650,275 (38,381,613)
Prepayments ........................................... 3,332,039 (4,546,607) 819,616
Accounts payable ...................................... 10,306,673 (20,344,178) 28,070,653
Unfunded pension obligation ........................... 0 (11,761,968) 3,903,961
Other liabilities ..................................... (1,815,241) 3,509,238 (7,036,106)
Effect of exchange rate changes ....................... (3,232,082) 5,367,876 1,616,716
------------ ------------ ------------
Net cash provided by operating activities ........................... 171,865,999 146,380,000 126,210,962
22. UNCERTAINTIES AS OF DECEMBER 31, 2006
JLEC's corporate tax return, payroll tax and VAT returns for the years 2003 to
2006 are open to audit. On January 2, 2007, JLEC was notified by the Moroccan
Tax Authorities of the review, starting January 22, 2007, of our (1) corporate
tax return for the period September 2002 to December 2005, (2) payroll tax for
years 2003 to 2005 and (3) VAT returns for the years 2003 to 2005. Our estimate
for the potential outcome for any uncertain tax issue is judgmental. JLEC
believes that the taxes accrued and payments of the tax liabilities are adequate
for these years.
23. NEW ACCOUNTING STANDARDS
STATEMENT NO. 154, ACCOUNTING CHANGES AND ERROR CORRECTIONS
This Statement replaces APB Opinion No. 20, Accounting Change, and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements, and changes the
requirements for the accounting for and reporting of a change in accounting
principle. This Statement applies to all voluntary changes in accounting
principle. It also applies to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition provisions, those
provisions should be followed.
This Statement is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005 relating to U.S. GAAP.
This new standard will not have any impact on JLEC's accounts.
STATEMENT NO. 157, "FAIR VALUE MEASUREMENTS"
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157, "Fair Value Measurements".
This new standard provides guidance for using fair value to measure assets and
liabilities. The standard clarifies that for items that are not actively traded,
such as certain kinds of derivatives, fair value should reflect the price in a
transaction with a market participant, including an adjustment for risk, not
just the company's mark-to-model value. Statement 157 also requires expanded
disclosure of the effect on earnings for items measured using unobservable data.
This Statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007. JLEC does not expect any material effect upon
the adoption of this new standard.
STATEMENT NO. 158, "EMPLOYERS' ACCOUNTING FOR DEFINED BENEFIT PENSION
AND OTHER POSTRETIREMENT PLANS" -- AN AMENDMENT OF FASB STATEMENTS NO. 87,
88, 106, AND 132R
On September 29, 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans" -- An Amendment of FASB
Statements No. 87, 88, 106, and 132R. This new standard requires an employer to:
(a) recognize in its statement of financial position an asset for a plan's
overfunded status or a liability for a plan's underfunded status; (b) measure a
plan's assets and its obligations that determine its funded status as of the end
of the employer's fiscal year (with limited exceptions); and (c) recognize
changes in the funded status of a defined benefit postretirement plan in the
year in which the changes occur. The gains or losses and prior service costs or
credits that arise during the period but are not recognized as components of net
periodic benefit cost pursuant to FASB No. 87 or No. 106 will be recognized as a
component of other comprehensive income
Page 26
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2006
23. NEW ACCOUNTING STANDARDS (CONTINUED)
The requirement to recognize the funded status of a benefit plan and the
disclosure requirements are effective as of the end of our fiscal year ending on
December 31, 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer's fiscal year-end is effective for
the year ending December 31, 2008.
JLEC does not expect any material effect upon the adoption of this new standard.
FIN NO. 48, "ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES--AN
INTERPRETATION OF FASB STATEMENT NO. 109"
On July 13, 2006, the FASB issued Interpretation No. 48, which interprets SFAS
No. 109, "Accounting for Income Taxes." This interpretation provides guidance
for the recognition, measurement, classification and disclosure of the financial
statement effects of a position taken or expected to be taken in a tax return
("tax position"). The financial statement effects of a tax position must be
recognized when there is a likelihood of more than 50 percent that based on the
technical merits, the position will be sustained upon examination and resolution
of the related appeals or litigation processes, if any. A tax position that
meets the recognition threshold must be measured initially and subsequently as
the largest amount of tax benefit that is greater than 50 percent likely of
being realized upon ultimate settlement with a taxing authority. The
Interpretation is effective for our fiscal year ending at December 31, 2007.
JLEC does not expect any material effect upon the adoption of this new standard.
EITF ISSUE NO. 06-3, "HOW TAXES COLLECTED FROM CUSTOMERS AND REMITTED
TO GOVERNMENTAL AUTHORITIES SHOULD BE PRESENTED IN THE INCOME STATEMENT
(THAT IS, GROSS VERSUS NET PRESENTATION)" (EITF 06-3)
In June 2006, the Emerging Issues Task Force ("EITF") reached a consensus on
EITF 06-3 to address any tax assessed by a governmental authority that is
directly imposed on a revenue-producing transaction between a seller and a
customer and may include, but are not limited to, sales, use, value added, and
some excise taxes. For taxes within the issue's scope, the consensus requires
that entities present such taxes on either a gross (i.e. included in revenues
and costs) or net (i.e. exclude from revenues) basis according to their
accounting policies, which should be disclosed. If such taxes are reported gross
and are significant, entities should disclose the amounts of those taxes.
Disclosures may be made on an aggregate basis. The consensus is effective for
our fiscal year ending on December 31, 2007.
JLEC does not expect any material effect upon the adoption of this new standard.
Page 27
(ERNST & YOUNG LOGO) - S.A.R.L. au Capital de 2.000.000 DH - 37, Bd. Abdellatif Benkaddour
R.C.Casa 46.813 Casablanca 20050
C.N.S.S : 1.172.064 Telephone: 022 95.79.00
PATENTE : 35.62.00.05 Fax : 022 39.02.26
I.F : 01.066.407
REPORT OF INDEPENDENT AUDITORS
To the Management Committee
And Shareholders of
JORF LASFAR ENERGY COMPANY S.C.A. (JLEC)
B.P. 99 - Sidi Bouzid
El Jadida, Morocco
We have audited the accompanying balance sheets of Jorf Lasfar Energy Company
S.C.A. (the Company) as of December 31, 2006 and 2005 and the related statements
of income, shareholders' equity, and cash flows for the years 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 audits. The financial statements of Jorf Lasfar Energy Company S.C.A. for
the year ended December 31, 2004 were audited by other auditors whose report
dated February 11, 2005, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards generally accepted
in the 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. We were not engaged to perform an audit of the
Company's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the 2006 and 2005 financial statements referred to above present
fairly, in all material respects, the financial position of Jorf Lasiar Energy
Company SCA at December 31, 2006 and 2005, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
Casablanca, Morocco, February 9th, 2007
/s/ ERNST & YOUNG
Report of Independent Auditors
To the Management Committee
and Stockholders of Jorf Lasfar
Energy Company S.C.A.
B.P. 99 Sidi Bouzid
El Jadida
We have audited the accompanying balance sheets of Jorf Lasfar Energy Company
S.C,A (the "Company") as of December 31, 2004, 2003 and 2002, and the related
statements of income, of stockholders' equity and of cash flows for the years
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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). 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 statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jorf Lasfar Energy Company
S.C.A at December 31, 2004, 2003 and 2002, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Price Waterhouse
Casablanca, Morocco,
February 11, 2005