annual report 2009

REGULATION & SUPERVISION BUREAUANNUAL REPORT 2009FOR THE WATER,WASTEWATER AND ELECTRICITY SECTOR IN THE EMIRATE OF ABU DHABI

SWITCHED ON

We regulate the water, wastewater and electricityindustries in the Emirate of Abu Dhabi in the UnitedArab Emirates. We enforce relevant laws through thelicensing of the companies who undertake regulatedactivities in these industries.

Regulated activities include: generation, transmission,distribution and sale of electricity; production,transmission, distribution, sale of water andcollection, treatment and disposal of wastewater.

Once a licence is issued, we monitor activities,produce and modify regulations where neededand enforce the conditions of the licences.

We establish and monitor technical performance,safety and customer standards.We also overseeindustry restructuring and have the power toapprove mergers and acquisitions.

Annual Report 2009 The Abu Dhabi Regulation & Supervision Bureau 1

CONTENTS

2 Chairman’s introduction3 Timeline4 Performance highlights6 The past decade8 Customer support

and tariffs10 Drinking water11 Wastewater12 Electricity13 Training and safety14 Economic controls16 Sector governance

and Board of Directors17 Licence holders19 Public Record of Activities

and Documents23 Financial Statements 33 Consultants

2 The Abu Dhabi Regulation & Supervision Bureau Annual Report 2009

CHAIRMAN’SINTRODUCTION

All those involved with the water,wastewater and electricity sector willunderstand what an extremely busyyear it has been.The start of 2009represented the Regulation andSupervision Bureau’s first decade inthe overseeing and regulation of thesector.

Since the unbundling of the sector in 1999, many changes have taken place including; almost all power andwater production now in private sector hands; theelectrical connection of the Emirates National Grid andmany changes to staffing levels and working practices.Indeed, the Bureau, at the start of its operations, hadfewer than ten staff and eight licence holders.Today, wehave nearly thirty licence holders and over forty staff.

Of particular importance over the past decade is theintroduction of various renewable energy schemes. Todate, we have issued two licences to the Abu DhabiFuture Energy Company (ADFEC), otherwise known asMASDAR. In addition, we are in the process of agreeing asuitable tariff for their concentrated solar power (CSP)project located at Madinat Zayed.This station seeks toproduce 110 MW from solar energy.With this landmarkproject, we hope to be working with MASDAR andother organisations to further renewable energy (RE)projects over the coming years.

In addition, this year we were involved in the issue of arange of new licences, especially to the wastewater sectorwhich has a need to install and operate temporarywastewater treatment plants for on-site facilities for staff.To this end, we created what are known as DevelopmentLicences which are of a finite duration.

In addition to development licences, we have also issued a new self–supply licence to EMAL, the major aluminiumsmelter plant located at Port Khalifa Industrial Zone(KPIZ).The company is licensed for the productionof 2,000 MW of electricity and the export of up to250 MW to the transmission system, which can bepurchased by ADWEC, the single buyer.

While we continue to perform a wide range of workstreams, one of our most important functions is thecontrol of monopoly expenditure through our wellestablished economic price control mechanisms, in thisinstance known as Price Control Four (PC4).At the closeof 2009, we had produced our Final Proposals for thetwo distribution companies, the transmission companyand the major sewerage services company, all of whichare monopoly operators and therefore subject to price controls.

Lastly, from an internal operational perspective, we havemade many changes, the most notable of which is ourrelocation to new offices in the Abu Dhabi City.This hasproved to be extremely successful and has provided staffand visitors alike with a range of meeting areas and amodern productive working environment.

On behalf of all our Board Members and staff at theRegulation and Supervision Bureau, welcome to our2009 Annual Report.

MOHAMMED AHMED AL BOWARDI

“Of particular importanceover the past decade is theintroduction of variousrenewable energy schemes.”


TIMELINE

Self-supply licence to ADFEC

Water SupplyRegulations 2009come into force

MarchJanuary

Consultation onWastewater Regulations

April

Amendments to sector laws

July

Self-supply licence to EMAL

September

Fuel Storage TankRegulations 2009 comeinto force

October

Launch of the GCClink connection

December

Price Controls 4 final proposals

GCC rulers launched theinterconnection project that will linkthe six countries’ power grids.(See p12)

These regulations aim to preventspills, ensure early detection of anyspill, leak or discharge from fuelstorage tank systems and minimisethe risk to the environment andpublic health.

EMAL was granted a self–supplylicence for water desalination andelectricity generation at the EMALAluminium Smelter Development.Electricity generation in excess ofself-supply requirements may beoffered for sale to ADWEC.

Law No (12) of 2009, amending Law No (17) of 2005, regarding thereorganisation of ADSSC. (See p16)

Law No (9) of 2009, amending Law No (2) of 1998, enabling theBureau to license a single entity toundertake one or more regulatedactivities. (See p16)

Issue of two consultation papers on“Trade Effluent Control Regulations”and “Wastewater Residuals ReuseRegulations”. (See p11)

These regulations cover connectionarrangements between customersand distribution companies to ensuresafe and secure supply connectionsand prevent wastage andcontamination.

ADFEC was issued a licence to build,operate and maintain a 10MW solarphotovoltaic power plant, primarilyfor internal consumption at MasdarCity but with the possibility to exportpower to the ADDC network.

Water QualityRegulations 2009

These regulations ensure the supplyof wholesome drinking water toconsumers throughout the Emirate.(See p10)

Final proposals for revised pricecontrols for the monopoly networkcompanies for the 2010-2013 periodwere issued. (See p14)

4 The Abu Dhabi Regulation & Supervision Bureau Annual Report 20094 The Abu Dhabi Regulation & Supervision Bureau Annual Report 2009

PERFORMANCEHIGHLIGHTS

+14.8%

Electricity 43,163 GWh includes exports

Electricity

+4.8%

Water (potable)

990,297 Ml (220,066 MG)

10,110 MW

Installed capacityAnnual production

3,107 Ml/d

Water (potable)

683 MGD

24.9

Electricity fils per kWh

Average unit costs

7.53

WaterAED per 1,000 litres or one cubic metre(34.2 AED per TG)

Demand for power during 2009showed little sign of slowing downand system peak demand was up 16 percent on the previous year.With the continued building of newproperties, we expect to see thistrend continue.

Annual Report 2009 The Abu Dhabi Regulation & Supervision Bureau 5Annual Report 2009 The Abu Dhabi Regulation & Supervision Bureau 5

Note: the percentage variation is as compared with the previous yearMW = megawatt;GWh = gigawatt hourTG = thousand gallons;MG = million gallons (imperial);MGD = million gallons (imperial) per dayMl = million litres;Ml/d = million litres per day;m3/d = cubic metre per day

+16%(17 August)

+6.67%(5 October)

+8.9%

7,032 M

5,929 M

1,124 M

347,906+6.7%

+5.8%

159,184

257,930

257,930

Electricity Hourly peak 7,680 MW (exports of 1,285 MW at the peak) Hourly peak for the Emirate of Abu Dhabi: 6,395 MW (+11%)

System demand

WaterTransmission peak 2,980 Ml/d (655 MGD) including the supply to Northern Emirates

Wastewater634,000 m3/d average, received at wastewater treatment plants (139.5 MGD,); equivalent annual total of 50,910 MG

Electricity AED

Sector turnover

WaterAED

WastewaterAED

Electricity

Customers

Total tests

Water quality

Water

Wastewater(estimated)


THE PASTDECADE

Output

Electricity and water demand continued to increaseduring 2009, maintaining growth rates similar to that ofthe past decade. Operators have progressively increasedcapacity to ensure that this demand is met in a safe andsecure manner.

As in previous years, the Emirate of Abu Dhabimaintained its support of the Northern Emirates andSharjah, supplying up to 1,300 MW of electricity toensure domestic demand was met.

Annual consumption

In the Emirate of Abu Dhabi, demand for electricity andwater is experiencing continuous and significant growth.Over the period shown, annual consumption of waterhas almost trebled. In that time, annual electricityconsumption has nearly doubled.

Unit costs

As consumption has continued to grow strongly,operators have been able to reap economies of scaleand the unit costs of water and electricity have risenslower than total costs. In real terms since 1999, the unitcost of electricity has reduced more significantly thanwater. Both of these trends show that the unit costs ofwater and electricity are under control and falling, whichillustrates the success of unbundling, the introduction ofprivate operators and regulation.

The diagrams opposite show all costs in real termsexpressed in 2009 prices.

Sector turnover

The significant increase in turnover for both water andelectricity reflects the growth of units produced.Therefore, despite reductions in unit costs, sectorturnover will reflect an increase in units sold.

Available capacityPeak supply

030201 04 05 06 07

655

614

568

541.

1

500

422

422

332

279

380

08 09

030201 04 05 06 07 08 09

WATER PEAK SUPPLY(MGD, 000)

6,39

5

5,75

6

5,28

6

4,79

0

4,45

5

4,32

0

4,00

8

3,72

3

4,13

4Available capacityActual peak demand Export

864 1,

285

901

ELECTRICITY DEMAND GROWTH(MW, 000)

030201 04 05 06 07 08 090

1

2

3

4

5

6

7

8

SECTOR TURNOVER(AED M) ElectricityWater

UNIT COSTSElectricity (fils/kWh)Water (AED/m3)

030201 04 05 06 07 08 09012345678910

0

10

20

30

40

50

Ultimately, the success of the sectoris measured by the reliable deliveryof water, wastewater and electricityservices at an economic price.Thegraphs below provide an overviewof price trends and sector outputover the recent past.


ON TRACK

The Bureau is on track by ensuring thecompanies it regulates are providing a rangeof high–level service delivery to customersand businesses in the Emirate. The arrival ofFormula 1 to Abu Dhabi in 2009 broughtwith it the highest profile test yet to theelectricity, water and wastewater sector andthe network companies were required tomeet a range of deadlines to ensure theevent went off without any problems.



CUSTOMERSUPPORT ANDTARIFFS

“An independent audit of thetwo distribution companiescompleted in 2009 focusedon the companies adherenceto published GuaranteedCustomer Service Standards. ”

Service Standards

The audit found a range of inadequacies in bothcompanies monitoring and recording procedures.We will continue our collaborative approach with bothcompanies in 2010 to assist them with:

• strengthening and effectively documenting their internalprocedures

• improving the quality and confidence in the monthlydata reported to the Bureau

The Code of Practice of Guaranteed Customer Service Standards will also be revised to more accurately reflect international benchmarking of customer service delivery levels, as well as addressingsome interpretation problems.

Lastly, in this regard we continued our work with the Abu Dhabi Sewerage Services Company to bring theirnew guaranteed customer service standards and customercomplaint handling procedures to their customers.

Customer service licence obligations

To help the distribution companies draft customerservice codes and procedures, the Bureau set up a joint customer services working group in 2009.A customer-friendly Supply Agreement, a Code ofPractice on Disconnection for Non-Payment andCustomer Complaint Handling Procedures wereproduced and will be operational, following consultationwith customers, in 2010.

Customers’ options for paying bills

In 2009, both distribution companies introduced newpayment options using credit cards, online and phonepayments.While there is still much work to do in thisarea, our overall aim is to promote a reduction in theneed to maintain many customer service centres as more customers pay their bills by other means.This aim will result in considerable operational savings.

Bulk Supply Tariff

The Bulk Supply Tariff (BST) is essentially the wholesaletariff whereby customers connected to the transmissiongrid can purchase bulk supplies of electricity and water bypaying a demand charge and a unit charge.The demandcharge is part of the “Peak Settlement Period” which,until 2009, looked at the average of three system peaksthat a customer’s demand covered at the time of thesystem peaks.

For the 2010 BST onwards, the definition of the PeakSettlement Period was changed from the average of three system peaks to the average of the 10 highest peakdemands in the year (each separated by three days,as before).

The primary reason for implementing such a change wasto reduce the risk to the sector of a large user avoidingone of the system peaks and potentially saving a third of their maximum demand charge.While there were just two distribution companies connected to the sectorthis situation was not possible, but with the connection of more large users then the dynamics are changedconsiderably.


“The Bureau regards thedevelopment of cost-reflectivetariffs for large users as animportant tool in providingincentives for such users tomanage their demands awayfrom system peaks.”

Large-user tariffs

During 2009, we worked with various large users todevelop tailored tariffs which are free from any form ofGovernment subsidy and therefore truly cost reflective.Under certain circumstances such tariffs are extremelyattractive to end users and are based on the followingcomponents:

• BST demand charge,Transmission Use of System(TUoS) charge and Distribution Use of System (DUoS)charge – all levied according to the customer's demandat the time of peak electricity system demand; and

• BST System Marginal Price (SMP) charges and supplycost component – both levied accordingly to thecustomer's consumption over the year.

Such a tariff offers a strong incentive for customers tomanage their electricity demand away from peak demandperiods, and has the potential for making significant costsavings for customers who are able to do so.

Therefore, a customer can benefit in terms of lower billswhile the sector benefits in terms of lower customerdemands and hence lower future requirements foradditional production and transmission capacity thanwould otherwise be the case.


DRINKINGWATER

Water Quality Regulations Revision 3

In July 2009, we completed a two-year consultationprocess on the Water Quality Regulations and issuedrevised regulations for implementation on 1 January2010.These Regulations reflect the new requirementsincluded in the third edition of the World HealthOrganization (WHO) water quality guidelines.

Bottled drinking water

We reviewed two laws concerning bottled drinkingwater: Law No (2) of 1998 concerning the Regulation of the Water and Electricity Sector in the Emirate of Abu Dhabi, and Law No (2) of 2008 in respect of Foodwithin the Emirate of Abu Dhabi. Both laws authorise the Bureau and Abu Dhabi Food and Control Authority(ADFCA) to regulate the quality of water leading to an overlap in regulatory authority.

The consultation process concluded with an agreementin principle that ADFCA will act as the lead regulator inthe development and issuing of regulations for bottledwater.The Bureau will retain a consultative role in thedrafting of such regulations.

Drinking Water Safety Plans (DWSP)

In our effort to minimise the risk of drinking watercontamination in water supply systems, in line with theWHO recommendations on best practice, we issued a guide for the development of DWSP’s to all affectedlicence holders.We reviewed their produced submissionsover the remainder of the year and are now satisfied thatplans appear adequate for the risks involved.

Unaccounted-for water

We provided transmission and distribution companieswith a new water balance methodology, based on the International Water Association (IWA) model.The companies will use these new templates for future Annual Information Submissions to the Bureau.

Unaccounted-for water and physical losses will bereported and audited from 2010 onwards in order tounderstand and reduce water loss within the transmissionand distribution systems.

In addition, both major distribution companies havebegun installing zonal, district and customer metering in allareas, along with active leakage control systems, to enablethe continuous monitoring of leakages.This programmewill be intensified when control centres are installed tomanage and analyse data. Such measures will enablethese companies to identify losses more accurately anddrive down water network losses.

“All drinking water in theEmirate is produced by someform of desalination.Therefore, such a valuableproduct needs to beprotected by the constantupdating of regulations. ”

WATER PRODUCTION BY COMPANIES (MG)

AMPC APC ECPC GTTP SCIPCO SEMBCORP TAPCO

10,5

43

11,4

21

43,6

96

17,2

64

46,1

51

16,9

29

26,0

42

25,9

54 32,9

40

33,9

97

31,8

45

33,7

06 41,8

35

51,9

0908 09 08 09 08 09 08 09 08 09 08 09 08 09

SECTOR’S OVERALL COMPLIANCEWITH WATER QUALITYREGULATIONS MEASURES

Prescribed Concentration Value (PCV)

93%

93%

07

08

94%09

Sampling Frequency (SF)

94%

94%

07

08

91%09

Sampled Parameter (SP)

95%

96%

07

08

95%09

Sampling Frequency Measure (SFM)

94%

95%

07

08

92%09

Available capacityPeak supply

030201 04 05 06 07

655

614

568

541.

1

500

422

422

332

279

380

08 09

WATER PEAK SUPPLY(PEAK IN MGD)


“We continue to seek to drive up wastewater standards in theEmirate. By 2010, new regulationswill be in force to control whatenters the system and howwastewater companies deal with their waste products”

WASTE WATER

Wastewater regulations

During 2009, we completed a Regulatory ImpactAssessment (RIA) that began in 2008 and ran a publicconsultation concerning draft regulations for managingtrade effluent discharges and wastewater residual reuse.The two draft regulations titled “Trade Effluent ControlRegulations” and “Wastewater Residuals ReuseRegulations” were published in April and a four-weekconsultation process sought views from a range ofstakeholders throughout the Emirate.

A significant number of responses were received fromgovernment agencies, wastewater service providers and developers. Respondents supported the proposedframework for controlling trade effluent discharges,commented on the scope of regulations for residualwastewater reuse, and raised the need for a clarificationof regulatory responsibilities.Working with keystakeholders, we reviewed the comments and beganredrafting the regulations.They are to be issued in Q22010.The “Wastewater Residual Reuse Regulations”are to be renamed the “Recycled Water and BiosolidsRegulations”.

Al Ain groundwater study

The Wastewater Team completed an investigation of the cause of rising groundwater in the city of Al Ainduring 2009.Working with Dornier Consulting, the team concluded that the issue was not exclusivelywastewater related, with over-irrigation with desalinatedwater and groundwater key contributory factors.Recycled wastewater from treatment plants was found to form a small part of the water balance in the city andan extensive sampling programme found no evidence of contamination of groundwater reserves.

Further work in conjunction with the Abu DhabiEnvironment Agency will be undertaken in 2010.


ELECTRICITY

Commissioning of GCC Interconnection

Phase one of the high voltage Gulf Cooperation Council(GCC) grid (which links the Kingdom of Saudi Arabia(KSA), Kuwait, Bahrain, and Qatar) was commissioned inFebruary 2009 and was energised on 26 July 2009.On 6 May 2009, the first inter-country power transferbetween KSA and Qatar commenced successfully withpower transfer of 60MW through a converter station.

The general agreement establishing the interconnectionwas signed on 23 March 2009 and the Power Exchangeand Trade Agreement (PETA), which sets out the termsof energy transfer, was signed on 7 July 2009.This 400kVGCC interconnection will improve the security of eachcountry’s transmission system by providing support during emergencies, reduce generation reserve requirements,and enable a common GCC electricity market.

The next phase will connect to the UAE via the Emirateof Abu Dhabi, planned for 2012, and lastly to Oman.

Connections review

The procedures and systems used by distribution companiesto provide new customer connections to their networkswere reviewed in 2009 due to a range of customersexperiencing delays in their final connection.

The review identified a lack of formalised documentsdefining ownership boundaries, control of customerconnection procedures and responsibilities. Subsequently,an international utility services consultant was appointedto review the connections procedures for ADDC and highlight gaps and bottlenecks.The consultants’report was issued at the end of 2009 and theirrecommendations are expected to be implemented in 2010.

YAS Island Formula 1 security review

The Bureau carried out a review of the security ofelectricity, water and wastewater arrangements at YasIsland, in preparation for the Formula 1 event held on 1 November 2009.A report recommending improvementmeasures was issued to the project developer and theoperator of the racetrack facilities.These weresuccessfully implemented prior to race day.

“By 2012, all member nationsof the Gulf Co-operativeCouncil will be connected toa high voltage electricity grid.”


ELECTRICITY GENERATION(MW, 000)

AMPC APC ECPC GTTP SCIPCO SEMBCORP TAPCO

492

752

9,18

3

4,08

0

9,79

5

3,89

9

6,54

8

6,26

9

8,02

7 10,0

41

3,15

6

4,37

3 6,12

3

8,03

4

08 09 08 09 08 09 08 09 08 09 08 09 08 09

ABU DHABI DISTRIBUTIONCOMPANY POWER INTERRUPTIONS

135

130

139

137

174

186

AL AIN DISTRIBUTION COMPANYPOWER INTERRUPTIONS

280

173

276

221

278

261

07

08

09

07

08

09

TRANSMISSION SYSTEMUNAVAILABILTY

1.10%07

1.54%08

1.90%09

07

08

09

07

08

09

SAIDI mins lost/customerSAIFI interruptions/customer x 100

Maintenance UsersContruction Faults

TRANSMISSION SYSTEM INCIDENTS

307

408

609

Energy lost MWh Number of incidents

0 1 2 3 4 5

030201 04 05 06 07

6,39

5

5,75

6

5,28

6

4,79

0

4,45

5

4,32

0

4,00

8

3,72

3

4,13

4

08 09

Available capacityActual peak demand Export

864 1,

275

901

ELECTRICITY DEMAND GROWTH(MW, 000)


“Training and the establishmentof our registered engineerprogrammes are key elementsin promoting compliance withsafe electrical installations.”

TRAININGAND SAFETY

Training

Electricity Wiring Regulations training

A training program for private contractors was designedby the Bureau and delivered regularly by two nominatedtraining companies. It consists of five days of practical testsplus theory and candidates are required to pass anexamination to enter the Bureau’s Registered Engineerdatabase.

Registered engineers

During 2009, 75 registered engineers successfullycompleted the Bureau-designed training course.They are listed on our website.The aim of this course is toimprove the skills of electrical contractors in the Emirateand to streamline procedures for approval and testing of new building wiring.

Safety audits

ADSSC health and safety management and operational review

Following a number of serious health and safety incidents during 2006-2009, the Bureau instructed Lloyds Register EMEA (a global best-practice Health,Safety and Environmental consultancy) to conduct amanagement and operational review of ADSSC’s health and safety practices.

A detailed final report was presented to ADSSC inSeptember. It included an action plan to be used to drive improvements in performance with regard to health and safety.

Sector safety

During 2009, the Bureau compiled and analysed incidentdata from all network and production companies.The health and safety performance data includes overalltrends and statistics such as lost time days per millionman hours worked, including contractors. During theperiod, there were five fatalities and 21 Lost Time Injuries(LTI’s), which is an increase on previous years.

The majority of these serious incidents related to workcarried out by contractors on behalf of the licensedcompanies. In 2010, the Bureau will develop strategies to improve contractor management procedures.

Lloyds Register EMEA

We appointed Lloyds Register EMEA to provide healthand safety and environmental (HSE) advice on all sectorrelated HSE issues on a fixed time and fee basis. Using theglobal services of Lloyds, through a permanent Lloyd’srepresentative based in our offices, enables a moreknowledge-based provision of HSE services given Lloydsinternational standing, skills and expertise.


ECONOMICCONTROLS

2009 Price Controls Review

During 2009, we completed a review of the pricecontrols applicable to each of the sector’s four monopolynetwork companies i.e.AADC,ADDC,ADSSC andTRANSCO.The primary purpose of price controls is todetermine the Maximum Allowed Revenue (MAR) thateach company may recover each year from its licensedactivities.

Issued in November 2009, our review proposed revisedprice controls to apply from 2010 onwards.This period isknown as “PC4”, as it is the fourth price control periodsince price controls were first introduced in 1999.Theprice controls are set to allow the companies an efficientlevel of operating and capital costs. In setting them, theBureau assesses the efficiency of the licensees’ operatingexpenditure.We also set provisional allowances forcapital expenditure for the same four–year period.

Our proposals in respect of operating expenditure andprovisional capital expenditure are summarised in thecharts opposite, alongside the companies’ ownprojections.While these price control allowances attemptto constrain the current rate of cost increases, theincreasing trend will continue with the growth in demand.

The Single Buyer (ADWEC)

The Bureau also commenced a price controls review forADWEC, the monopoly company responsible forprocuring electricity and water produced in the Emirate.We decided on a separate review process for ADWEC,as it has few capital assets and the issues of concern arevery different to those of the network companies.

During the year, we issued two consultation papersrelating to the ADWEC price controls review, and expectto publish our proposals for ADWEC in the first half of 2010.

Renewable energy – economic price review

The Government of Abu Dhabi strongly supports thedevelopment of renewable energy technologies as animportant component of the strategy for meeting theEmirate’s future electricity demand.

As renewable energy tends, at present, to be moreexpensive than conventional generation, the Bureau mustensure that the electricity prices paid to renewableenergy producers are appropriate for the giventechnology.

To this end, during the year, we contributed to a studyby independent consultants to determine the economicprice of electricity for the 110 MW concentrated solarpower (CSP) plant to be developed by ADFEC (Masdar)at the city of Madinat Zayed in al Gharbia (westernregion). Much work has been completed on this projectand we expect construction to start in 2010.

PC4 OPEX PROJECTIONS – FINAL PROPOSALS(AED 000m 2010 prices)

PC projectionsActual

Companies forecastFinal proposalsDraft proposals

4

3

2

1

PROVISIONAL PC4 CAPEX ALLOWANCES(AED 000m, 2010 prices)

Actual CapexCompanies forecastFinal proposalsDraft proposals

4

3

2

1

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

“In terms of turnover, some40 percent of expenditurerests with monopolycompanies so how theymanage their costs isimportant. Price controls arehow the Bureau controls suchcompanies financially. ”

The Bureau is on target with the direction the sector takes regarding regulation.Enabling measures include the issue of regulations and licences to sectorparticipants and the provision of a number of consents.We also consult widely with thesector so as to ensure our decision making is understood and fair. This year we issued anumber of new licences including a self–supplylicence to a major industrial metals company.

ON TARGET



SECTORGOVERNANCEAND BOARD OF DIRECTORS

Changes to Law No (2) of 1998

The governing law for the water and electricity sector isLaw No (2) of 1998 Concerning the Regulation of theWater and Electricity Sector in the Emirate of Abu Dhabi,and its amendments. In 2009, Law No (2) of 1998 wasamended by a new law:

• Law No (9) of 2009, effective from 31 July 2009, madeamendments enabling the Bureau to license a single entityto undertake one or more regulated activities.

For example, the Bureau has licensed Abu Dhabi FutureEnergy Company to undertake the generation ofelectricity and the treatment and disposal of sewage and wastewater.

ADSSC reorganisation

The governing law for sewerage and wastewater is LawNo (2) of 1998 together with Law No (17) of 20051

Concerning the Establishment of the Abu DhabiSewerage Services Company (ADSSC), as amended.

In 2009, Law No (17) of 2005 was amended by Law No (12) of 2009, which reorganised ADSSC and gave theformer ADWEA group company direct reporting lines to the Executive Council.The shares in ADSSC are now100 % owned by the Abu Dhabi Government.

The Board

In mid 2008, the Bureau's Board of Directors was changedto represent more clearly the new reporting structurebrought about by a change in Law No (19) of 2007.

The Board of Directors for the period 2008-2013 wasappointed by His Highness Sheikh Mohamed Bin Zayedon 9 April 2008 as follows:

HE Mohamed Ahmed Al Bowardi

HE Hamad Al Hurr AL Suwaidi

HE Mohamed Abdullah Bin Sahoo Al Suwaidi

HE Falah Mohamed Al Ahbabi

Mr Ibrahim Mubaydeen

1 As at the date of preparing this Annual Report (2009)


LICENCE HOLDERS

We grant licences to “Persons” (undertakings, companies,organisations) to carry out certain activities. Collectively,these Persons are known as licence holders.

Licences are structures which confer rights andobligations on a licence holder in order for them toundertake regulated activities.

Our primary annual funding is derived from licenceholders via the application of fees.

Distribution

Abu Dhabi Distribution Company (ADDC) distributesand sells water and electricity to around 240,000customers in the old Municipality area of Abu Dhabi.

Al Ain Distribution Company (AADC) distributes andsells water and electricity to around 109,000 customersin the old Municipality area of Al Ain.

Generation/ water production

Abu Dhabi Future Energy Company (ADFEC) is licensedto produce up to 40 megawatts (MW) of electricity byEmbedded Generation Unit(s) using wind turbineslocated in the Al Gharbia Municipality and connected to a Distribution System.ADFEC’s first wind turbine, on Sir Bani Yas Island, has a capacity of 850kW.ADFEC is also licensed to produce up to 10 MW of electricity at its solar photovoltaic power plant located at theMasdar City Development.

Al Mirfa Power Company (AMPC) operates threepower stations at Al Mirfa, Madinat Zayed and Al Ain witha total licensed capacity of 636 MW.Water production ofup to 38.7 MGD is at the Al Mirfa station only.

Arabian Power Company (APC) is licensed to generate2,200 MW of electricity and 160 MGD of desalinatedwater at its Sass Al Nakheel plant.

Emirates Aluminium Company Limited PJSC (EMAL) has a self-supply licence for desalination of water andgeneration of electricity at the EMAL Aluminium SmelterDevelopment. Electricity generation in excess of self-supply requirements may be offered for sale to ADWEC.

Emirates CMS Power Company (ECPC), (T2) is the firstIWPP in the Emirate. It is licensed to produce 50 MGDof water and generate 763 MW of electricity at the oldTaweelah A2 site.

Emirates Sembcorp Water and Power Company(Sembcorp), (F1) is licensed to produce up to 100 MGDof water and 861 MW of electricity at its plant located atQidfa in Fujairah, one of the Northern Emirates of theUAE. Majority of the water produced is delivered to theEmirate of Abu Dhabi via a transmission pipeline ownedand operated by TRANSCO.

Fujairah Asia Power Company (FAPCO), (F2) is thesecond Fujairah licensed operator, situated at the Qidfacomplex.The plant is currently under construction, duefor completion by 2010. FAPCO is licensed to produce up to 2,000 MW of electricity and 130 MGD of desalinated water.

Gulf Total Tractebel Power Company (GTTPC), (T1) islicensed to produce 84.8 MGD of desalinated water and1,600 MW of electricity at its Al Taweelah plant. GTTPCwas the first IWPP in the Emirate to adopt existing assets.

Ruwais Power Company (S2) is licensed to produce upto 100 MGD of water and 1,500 MW of electricity atthe Shuweihat site – currently under construction.

Shuweihat CMS International Power Company(SCIPCO), (S1) is licensed to produce up to 1,500 MWof electricity and 100 MGD of desalinated water at itsShuweihat Plant.

Taweelah Asia Power Company (TAPCO), (T3) islicensed to produce 160 MGD of water and 2,000 MWof electricity at the old Taweelah B and B2 plants.

Tourism Development and Investment Company PJSC(TDIC) has a licence to extract and desalinate seawaterfor non-potable and potable purposes on Saadiyat island.

Umm Al Nar Power Company (UANPC) owns Baniyaspower station with a licensed capacity of 120 MW,currently not in production.

Multi-licensed

Abu Dhabi Company for Servicing Remote Areas(RASCO) is licensed to generate, desalinate, transmit,distribute and sell electricity and water in remote areas,not connected to either of the distribution networks.

Procurement

Abu Dhabi Water and Electricity Company (ADWEC) is the single buyer of water and electricity output andcapacity from producers under various Power and Water Purchase Agreements and charges the distributioncompanies for water and electricity, under a Bulk Supply Tariff.

Transmission

Abu Dhabi Transmission and Despatch Company(TRANSCO) is responsible for all transmission voltagesat 400, 220 and 132 kV including despatch of generationunits, water balancing and the bulk movement of waterthroughout the Emirate.


LICENCE HOLDERSCONTINUED

Wastewater

Abu Dhabi Sewerage Services Company (ADSSC) isresponsible for the collection, treatment and disposal ofwastewater throughout the Emirate of Abu Dhabi.

ALDAR Properties PJSC is licensed to collect, treat anddispose of 9,000 cubic metres of wastewater per day fora period of five years on the Yas Island Development.

Al Etihad Biwater Waste Water Company, (W1) islicensed to treat wastewater at Al Wathba-Abu Dhabi(up to 345,000 cubic metres per day) and at Al Saad-AlAin (up to 92,000 cubic metres per day).

Al Wathba Veolia Besix Waste Water Company, (W2) is licensed to treat wastewater at Al Wathba-Abu Dhabi(up to 300,000 cubic metres per day) and at Alhamah-AlAin (up to 130,000 cubic metres per day).

Archirodon Construction (Overseas) Co. S.A. is licensedto collect, treat and dispose of 1,000 cubic metres ofwastewater per day for a period of three years.

Higher Corporation for Specialized Economic Zones(ZonesCorp) is licensed to collect, treat and dispose ofup to 40,000 cubic metres of wastewater per day on thesite of the Industrial City – Abu Dhabi (ICAD).

LOCATION OF LARGE SCALE LICENSEDGENERATION AND DESALINATION COMPANIES

ù ùExistingplant

Plant underconstruction

TaweelahDubai

Abu Dhabi Al Ain

Liwa

Dhaid

Al MirfaJebal Dhana

ùA

APCùT1

GTTPC ùT2

ECPC ùT3

TAPCO ùF1

Sembcorp

ùMùS1

SCIPCO

ùF2

FAPCO

ùS2

RPC AMPC


PUBLIC RECORD OF ACTIVITIES AND DOCUMENTS

In law we have a duty to maintain a Public Register.This section of our Annual Report is constructed so as to list documents which are part of our Public Register.

For the purpose of satisfying the law we maintain our Public Register using our website, where all Public Register documents are available for free view and download.

Licensing

New licences

Aldar Properties PJSC01 May 2009ED/L07/003Sewerage, wastewater treatment and disposal licence

Ruwais Power Company28 Aug 2009ED/L01/021Water desalination and electricity generation licence

Al Wathba Veolia Besix Waste Water Company01 Sep 2009ED/L01/022Sewerage, wastewater treatment and disposal licence

Emirates Aluminium Company Limited PJSC01 Sep 2009ED/L08/002Water desalination and electricity generation self-supplylicence

Tourism Development and Investment Co PJSC (TDIC) 01 Sep 2009ED/L07/004Water desalination development licence

Higher Corporation for Specialized Economic Zones23 Nov 2009ED/L01/023Sewerage, wastewater treatment and disposal licence

Modifications

Modifications to a licence are made subject to agreementby the appropriate licence holder.

Al Mirfa Power Company05 Jan 2009ED/L01/001Water desalination and electricity generation licence

Aldar Properties PJSC09 Jun 2009ED/L07/003Sewerage, wastewater treatment and disposal licence

Archirodon Construction (Overseas) Co. S.A.12 Nov 2009ED/L07/001Sewerage, wastewater treatment and disposal licence

Derogations

Derogations are issued by the Bureau to a licensedoperator for a period and on terms specified in the derogation, from the performance of particularlicence conditions.

Abu Dhabi Water and Electricity Company (ADWEC)16 Feb 2009ED/L06/006Maximum Allowed Revenues for 2009 for the ElectricityProcurement Business

Abu Dhabi Sewerage Services Company (ADSSC)16 Feb 2009ED/L06/007Maximum Allowed Revenues for 2009 for the SewerageServices Businesses

Revocations

A revocation is the cancellation of a licence by the Bureau.

Bainounah Power Company PJSC (BPC)20 Feb 2009ED/L05/001Revocation of Water Desalination and ElectricityGeneration Licence

ALDAR Laing O’Rourke Construction LLC09 Jun 2009ED/L05/002Revocation of Sewerage,Wastewater Treatment andDisposal Licence

Consents

Consents confer rights and obligations on licence holders.Please note revisions or renewal of consents are listed forthe sake of completeness.

Abu Dhabi Distribution Company (ADDC)02 Apr 2009ED/L03/038Purchase of electricity from embedded generators

Arabian Power Company (APC)16 Apr 2009ED/L03/032Sale of demineralised water to Consolidated ContractorsInternational Company


PUBLIC RECORD OF ACTIVITIES AND DOCUMENTSCONTINUED

Consents (continued)

Arabian Power Company (APC)22 Apr 2009ED/L03/009Sale of demineralised water to specified customers

Taweelah Asia Power Company (TAPCO)22 Apr 2009ED/L03/033Transfer of assets from TAPCO to TRANSCO

Abu Dhabi Transmission Company (TRANSCO)01 Jun 2009ED/L03/039Disposal of certain assets

Emirates Sembcorp Water and Power Company 14 Jul 2009ED/L03/040Sale of potable water to Dolphin Energy

Taweelah Asia Power Company (TAPCO)23 Jul 2009ED/L03/041Sale of demineralised and distilled water to EMAL

Abu Dhabi Distribution Company (ADDC)30 Jul 2009ED/L03/042Sale of non-potable water to the TDIC

Abu Dhabi Transmission Company (TRANSCO)11 Oct 2009ED/L03/043Disposal of certain assets

Abu Dhabi Transmission Company (TRANSCO)11 Oct 2009ED/L03/044Extension of consent for the disposal of assets

Consents for relaxation of TDS and conductivity limitsspecified in the Water Quality Regulations:

Al Mirfa Power Company (AMPC)18 Oct 2009ED/L03/045

Arabian Power Company (APC)18 Oct 2009ED/L03/046

Gulf Total Tractebel Power Company (GTTPC)18 Oct 2009ED/L03/047

Shuweihat CMS International Power Company18 Oct 2009ED/L03/048

Taweelah Asia Power Company (TAPCO)18 Oct 2009ED/L03/049

Abu Dhabi Transmission and Despatch Company18 Oct 2009ED/L03/050

Emirates CMS Power Company (ECPC)18 Oct 2009ED/L03/051

Al Ain Distribution Company (AADC)18 Oct 2009ED/L03/052

Abu Dhabi Distribution Company (ADDC)18 Oct 2009ED/L03/053

Emirates Sembcorp Water and Power Company 25 Nov 2009ED/L03/056

Abu Dhabi Transmission Company (TRANSCO)11 Nov 2009ED/L03/054Disposal of certain assets

Abu Dhabi Distribution Company (ADDC)24 Nov 2009ED/L03/055The provision of call centre services to third parties

Consultation papers

Consultation papers are designed to seek views from arange of stakeholders and other interested parties onmatters which may have a significant impact on licenceholders or customers.

Regulations

Second Consultation on Water Quality Regulations Revision 3CD/R01/013For the provision of wholesome drinking water toconsumers by licence holders

Wastewater Residual Reuse Regulations 2009 Public ConsultationCD/T06/004Proposals for the safe and economic management ofrecycled water and biosolids


Trade Effluent Control Regulations 2009 Public ConsultationCD/T06/003Proposals for managing industrial and commercial inputsto the wastewater collection system

Price Controls Review

Second consultation paper (network companies)CR/E02/033

Second consultation paper (ADWEC)CR/E02/034

Draft proposals (network companies)CR/E02/035

Final proposals (network companies)CR/E02/036

General

Proposed Water Quality Performance Indicator for Network CompaniesCP/T03/004A number of key parameters for the management and quality of water through the transmission and distribution phases of the water supply process

Methodology of Charges for Connection to the Water Distribution SystemCD/C01/015Proposals for distribution companies’ method of chargingfor new connections to their distribution system

Regulations

The Water Supply Regulations 2009ER/P04/003Cover connection arrangements between customers and distribution companies to ensure safe and securesupply connections and prevent wastage, contaminationand over-consumption.

The Water Quality Regulations 2009ER/R04/003For the provision of wholesome drinking water toconsumers by licence holders

The Fuel Storage Tank Regulations 2009ED/R01/015For the prevention and early detection of any spill, leak ordischarge from fuel storage tank systems

Policy Statement for Market Share Regarding Desalinationand Generation Licence in the Emirate of Abu DhabiED/S02/002Guidance on our overall approach to market share andmarket dominance

Publications

Annual work plan 2009ER/P01/012

Water and electricity sector overviewER/P01/013

Annual report for 2008 – ArabicER/P02/017

Annual report for 2008 – EnglishER/P02/018

Guide for developers and licensed entrants to the water, wastewater and electricity sector in the Emirate of Abu Dhabi 2009ER/P01/009

Guide to Water Supply Regulations 2009ER/P04/003

Scale of Charges and Services 2009ER/E01/003

Reports

Reports are produced either by Bureau staff or externallyappointed consultants.They are not necessarily in the public domain.

Audit reports

Three audits were completed by our staff to reviewnetwork performance measures (2005 – 2007) for:

Al Ain Distribution Company (AADC)ER/T03/027

Abu Dhabi Transmission and Despatch Company(TRANSCO)ER/T03/028

Abu Dhabi Distribution Company (ADDC)ER/T03/029

Reviews

Review of Power Supply Security for Yas Island (Formula 1 Event)IR/T02/001

Review of Water and Wastewater Services for Yas Island(Formula 1 Event)IR/T02/002

TRANSCO Contract Cost AnalysisER/T03/031

Operational Procedures Review – AADCER/T04/004

Operational Safety Procedures Review – ADDCER/T04/005

The Bureau is on record in terms ofmanaging its internal affairs and continuouslyseeking to drive down costs and thereforelicence fees. However, given the need to keepup with new sector developments we havebeen required to increase staff numbers andalso moved to a new office. Under thesecircumstances we have still managed tokeep fees increases below the rate of UAEinflation and have continued to meet an evergreater workload.

ON RECORD



We have audited the accompanying financial statements of Regulation and Supervision Bureau (“the Bureau”), whichcomprise the statement of financial position as at 31 December 2009 and the statements of funding and expenditureand accumulated deficit and cash flow statement for the year then ended, and a summary of significant accountingpolicies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance withInternational Financial Reporting Standards.This responsibility includes: designing, implementing and maintaining internalcontrol relevant to the preparation and fair presentation of financial statements that are free from materialmisstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our auditin accordance with International Standards on Auditing.Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are freefrom material misstatement.

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

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

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bureau as of31 December 2009 and the results of its financial performance and its cash flows for the year then ended inaccordance with International Financial Reporting Standards.

ERNST & YOUNG

30 JUNE 2010

ABU DHABI

INDEPENDENT AUDITORS’ REPORT TO THE BOARD MEMBERS OF THE REGULATION AND SUPERVISION BUREAU


STATEMENT OF FINANCIAL POSITIONAt 31 December 2009

2009 2008Notes AED AED

AssetsNon-current assetsFurniture and equipment 3 7,751,921 2,093,715Advance to employee 226,715 306,989

7,978,636 2,400,704

Current assetsPrepayments and other receivables 4 7,210,568 2,924,291Bank balances and cash 5 27,016,985 4,067,321

34,227,553 6,991,612

Total assets 42,206,189 9,392,316

Surplus and liabilitiesAccumulated surplus (deficit)Accumulated surplus (deficit) 1,754,765 (197,448)

Non-current liabilityEmployees’ end of service benefits 7 8,516,300 6,468,501

Current liabilitiesAccounts payable and accruals 6 31,935,124 3,121,263

Total liabilities 40,451,424 9,589,764

Total surplus and liabilities 42,206,189 9,392,316

Mohammed Al Bawardi Nick CarterCHAIRMAN DIRECTOR GENERAL

The attached notes 1 to 11 form part of these financial statements.

Balance Sheet



Statement of funding and expenditure

FundingLicense fees 9 44,162,951 32,236,825Other income 401,115 450,000Interest income 376,600 92,245

44,940,666 32,779,070

ExpenditureSalaries and staff related costs 36,898,704 28,431,050Depreciation 3 1,454,044 290,445Rent expense 1,156,899 1,101,907Publicity 517,038 326,924Recruitment 139,320 402,123Professional fee 475,569 382,837Others 2,346,879 1,677,853

42,988,453 32,613,139

Surplus for the year 1,952,213 165,931

Statement of accumulated surplusBalance at 1 January (197,448) (363,379)Surplus for the year 1,952,213 165,931

Balance at 31 December 1,754,765 (197,448)


STATEMENTS OF FUNDING AND EXPENDITURE AND ACCUMULATED SURPLUSYear ended 31 December 2009



Operating activitiesSurplus for the year 1,952,213 165,931Adjustments for :

Provision for employees’ end of service benefits 7 2,047,799 2,928,204Interest income (376,600) (92,245)Furniture and fixtures written off 25,106 –Depreciation 3 1,454,044 290,445

5,102,562 3,292,335

Working capital adjustments:Prepayments and other receivables (4,286,277) 75,886Accounts payable and accruals 28,813,861 1,652,290

Cash from (used in) operations 29,630,146 5,020,511Employees’ end of service benefits paid 7 – (106,121)

Net cash from (used in) operating activities 29,630,146 4,914,390

Investing activitiesPurchase of furniture and equipment 3 (7,138,165) (1,877,280)Proceeds from the disposal of furniture and equipments 809 –Interest received 376,600 92,245Advance to employees 80,274 (221,997)

Net cash from (used in) investing activities (6,680,482) (2,007,032)

Increase (decrease) in cash and cash equivalents 22,949,664 2,907,358

Cash and cash equivalents at 1 January 4,067,321 1,159,963

Cash and cash equivalents at 31 December 5 27,016,985 4,067,321


STATEMENT OF CASH FLOWS Year ended 31 December 2009


1 Activities

Regulation and Supervision Bureau (“the Bureau”) wasestablished under Law no. (2) of 1998 to regulate thewater and electricity sector in the Emirate of Abu Dhabi.

The Bureau is funded by the payment of licence fees bythose entities awarded licences and is a not for profitorganisation.

The Bureau’s registered office is at P O Box 32800,Abu Dhabi, United Arab Emirates.

The financial statements of the Bureau for the year ended31 December 2009 were authorised for issue by themanagement on 30 June 2010.

2.1 Basis of preparation

The financial statements are prepared under the historicalcost convention as modified for the measurement at fairvalue of derivative financial instruments and available forsale investments.

The financial statements have been presented in UnitedArab Emirates Dirhams (AED), which is the functionalcurrency of the Bureau.

Statement of compliance

The financial statements have been prepared inaccordance with International Financial ReportingStandards (“IFRS”) as issued by the InternationalAccounting Standards Board (IASB).

2.2 Changes in accounting policies and disclosures

The accounting policies adopted are consistent withthose of the previous financial year except as follows:

The Bureau has adopted the following new and amendedIFRS and IFRIC interpretations as of 1 January 2009:

• IFRS 2 Share-based Payment:Vesting Conditions andCancellations effective 1 January 2009

• IFRS 7 Financial Instruments: Disclosures effective 1 January 2009

• IFRS 8 Operating Segments effective 1 January 2009• IAS 1 Presentation of Financial Statements effective

1 January 2009• IAS 23 Borrowing Costs (Revised) effective 1 January

2009• IAS 32 Financial Instruments: Presentation and IAS 1

Puttable Financial Instruments and Obligations arisingon Liquidation effective 1 January 2009

• IFRIC 13 Customer Loyalty Programmes effective 1 July 2008

• IFRIC 16 Hedges of a Net Investment in a ForeignOperation effective 1 October 2008Improvements to IFRSs (May 2008)

The adoption of the above standards and interpretationsdid not have any effect on the financial performance orposition of the Bureau. However, the adoption of certainstandards and interpretations resulted in certaindisclosures in the financial statements as described below:

IAS 1 Presentation of Financial StatementsThe revised standard separates owner and non-ownerchanges in equity.The statement of changes in equityincludes only details of transactions with owners,with non-owner changes in equity presented in areconciliation of each component of equity. In addition,the standard introduces the statement of comprehensiveincome: it presents all items of recognised income and expense, either in one single statement, or in twolinked statements.The Bureau has elected to present one statements.

IFRS 7 Financial Instruments: DisclosuresThe amended standard requires additional disclosureabout fair value measurement and liquidity risk. Fair valuemeasurements are to be disclosed by source of inputsusing a three level hierarchy for each class of financialinstrument. In addition, reconciliation between thebeginning and ending balance for Level 3 fair valuemeasurements is now required, as well as significanttransfers between levels in the fair value hierarchy.Theamendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactionsand assets used for liquidity management.The fair valuemeasurement disclosures are presented in note 10.The liquidity risk disclosures are not significantly impactedby the amendments and are presented in note 11.

IAS 23 Borrowing Costs The standard has been revised to require capitalisation ofborrowing costs on qualifying assets.The adoption of thisamendment did not have any impact on the financialposition or performance of the Bureau.

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

NOTES TO THE FINANCIAL STATEMENTSAt 31 December 2009

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDAt 31 December 2009


2.3 Significant accounting judgement, estimates and assumptions

The preparation of the Bureau’s financial statementsrequires management to make judgements, estimates and assumptions that affect the reported amounts ofrevenues, expenses, assets and liabilities, and thedisclosures of contingent liabilities, at the reporting date.However, uncertainty about these assumptions andestimates could result in outcomes that could require amaterial adjustment to the carrying amount of the assetor liability affected in the future periods.

Estimation uncertainty

The key assumptions concerning the future and otherkey sources of estimation uncertainty at the reportingdate that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilitieswithin the next financial year are discussed below:

Useful lives of property, plant and equipmentThe Bureau’s management determines the estimateduseful lives of its property, plant and equipment forcalculating depreciation.This estimate is determined afterconsidering the expected usage of the asset or physicalwear and tear. Management reviews the residual valueand useful lives annually and the future depreciationcharge would be adjusted where management believesthat the useful lives differ from previous estimates.

2.4 Summary of significant accounting policies

Funding

Licence fees funding from the licensees in respect of thecurrent year are accounted for in the statement offunding and expenditure based on the amount of thecash expenditure incurred during the year.Any fundingreceived in excess of the cash expenditure is refundedback to licensee in every two years. Short funding isrecovered from licensee in every two years.

Interest income

Interest revenue is recognised as the interest accruesusing the effective interest method, under which the rateused exactly discounts estimated future cash receiptsthrough the expected life of the financial asset to the net carrying amount of the financial asset.

Capital work in progress

Capital work in progress is recorded at cost andrepresents costs based on contractual payments for thedesign, development, procurement, construction andcommissioning of the plant and overhead expenses andthose incurred during the development stage directlyattributable to the construction of the plant.The capitalwork in progress is transferred to the appropriate assetcategory and depreciated in accordance with theAuthority’s policies when construction of the asset is completed and commissioned

Furniture and equipment

Furniture and equipment are stated at cost lessaccumulated depreciation and any impairment in value.

Depreciation is calculated on a straight line basis over theestimated useful lives of the assets as follows:

Computer equipment over 3 yearsOffice equipment and furniture over 5 yearsMotor vehicle over 3 years

The carrying values of furniture and equipment arereviewed for impairment when events or changes incircumstances indicate the carrying value may not berecoverable. If any such indication exists and where thecarrying values exceed the estimated recoverableamount, the assets are written down to their recoverableamount, being the higher of their fair value less costs tosell and their value in use.

Expenditure incurred to replace a component of an item of furniture and equipment that is accounted forseparately is capitalised and the carrying amount of the component that is replaced is written off. Othersubsequent expenditure is capitalised only when itincreases future economic benefits of the related item ofproperty, plant and equipment.All other expenditure isrecognised in the statement of funding and expenditureas the expense is incurred.

An item of property, plant and equipment is derecognisedupon disposal or when no future economic benefits are expected from its use or disposal.Any gain or lossarising on derecognition of the asset (calculated as thedifference between the net disposal proceeds and the carrying amount of the asset) is included in thestatement of funding and expenditure in the year theasset is derecognised.

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in thefuture for goods or services received, whether billed bythe supplier or not.


Impairment and uncollectibility of financial assets

An assessment is made at each statement of financialposition date to determine whether there is objectiveevidence that a specific financial asset may be impaired. Ifsuch evidence exists, any impairment loss is recognised inthe statement of funding and expenditure. Impairment isdetermined as the difference between the present valueof future cash flows discounted at the current marketrate of return for a similar financial asset.

Cash and cash equivalents

For the purpose of the statement of cash flows, cash andcash equivalents consist of cash in hand, bank balances,and short-term deposits with an original maturity ofthree months or less, net of outstanding bank overdrafts.

Accounts receivable

Accounts receivable are stated at original invoice amountless a provision for any uncollectible amounts.Anestimate for doubtful debts is made when collection ofthe full amount is no longer probable. Bad debts arewritten off when there is no possibility of recovery.

Employees’ end of service benefits

The Bureau provides end of service benefits to itsexpatriate employees.The entitlement to these benefits isusually based upon the employees’ length of service andcompletion of a minimum service period.The expectedcosts of these benefits are accrued over the period of employment.

With respect to its national employees, the Bureau makescontributions to Abu Dhabi Retirement Pension andBenefit Fund calculated as a percentage of the employees’salaries.The Bureau’s obligations are limited to thesecontributions, which are expensed when due.

Financial instruments

Financial instruments include receivables, bank balancesand cash, bank overdrafts, payables and certain otherassets and liabilities.

Fair values of financial instruments are based onestimated fair values using such methods as net presentvalues of future cash flows.

2.5 Future changes in accounting policies – standards issued but not yet effective

Standards issued but not yet effective up to the date of issuance of the Bureau’s financial statements arelisted below

• IFRIC 17 Distributions of Non-cash Assets to Owners• IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments• IFRS 2 Share based payments: Group cash-settled

share based payment transactions• IFRS 3 Business Combinations (Revised) and IAS 27

Consolidated and Separate Financial Statements(Amended)

• IFRS 9 Financial Instruments• IAS 24 Related Party Disclosures• IAS 39 Financial Instruments: Recognition and

Measurement – Eligible Hedge items• Improvements to IFRS (April 2009)

In the opinion of management, the adoption of the abovestandards and interpretations will have no impact on thefinancial position or performance of the Bureau.



3 Furniture and equipment

OfficeWork in Motor equipmentprogress vehicle and furniture Total

AED AED AED AED

2009Cost:

At 1 January 2009 1,473,725 74,000 1,441,865 2,989,590Additions 3,504,669 168,000 3,465,496 7,138,165Transferred from work in progress (4,978,394) – 4,978,394 –Disposals during the year – – (40,684) (40,684)

At 31 December 2009 – 242,000 9,845,071 10,087,071

Depreciation:At 1 January 2009 – 9,732 886,143 895,875Depreciation charge for the year – 76,677 1,377,367 1,454,044Relating to disposals – – (14,769) (14,769)

At 31 December 2009 – 86,409 2,248,741 2,335,150

Net carrying amount:At 31 December 2009 – 155,591 7,596,330 7,751,921

2008Cost:

At 1 January 2008 – – 1,112,310 1,112,310Additions 1,473,725 74,000 329,555 1,877,280

At 31 December 2008 1,473,725 74,000 1,441,865 2,989,590

Depreciation:At 1 January 2008 – – 605,430 605,430Depreciation charge for the year – 9,732 280,713 290,445

At 31 December 2008 – 9,732 886,143 895,875

Net carrying amount:At 31 December 2008 1,473,725 64,268 555,722 2,093,715

Total construction commitment of the Company at 31 December 2009 is nil (2008:AED 3,021 thousands).

4 Prepayments and other receivables

2009 2008AED AED

Prepaid staff rent 2,130,310 1,663,198Other prepayments 896,700 1,179,071Amounts due from related parties (note 8) 3,959,824 –Other receivables 223,734 82,022

7,210,568 2,924,291


5 Bank balances and cash

Included in bank balances and cash of AED 27,016,985 (2008:AED 4,067,321) are bank deposits of AED 25,586,240(2008:AED 1,687,476) with a commercial bank in Abu Dhabi.These are denominated in UAE Dirhams, short term innature, with effective interest rate of 2.07% (2008: 2.2%).

6 Accounts payable and accruals

2009 2008AED AED

Accounts payable 2,054,368 1,822,401Accrued expenses 1,359,736 426,689Licence fees received in advance from ADWEA 28,521,020 125,000Amounts due to related parties (note 8) – 747,173

31,935,124 3,121,263

7 Employees’ end of service benefits

Movements in the provision recognised in the statement of financial position are as follows:

2009 2008AED AED

Balance at 1 January 6,468,501 3,646,418Provided during the year 2,047,799 2,928,204Employees’ end of service benefits paid – (106,121)

Balance at 31 December 8,516,300 6,468,501

8 Related party transactions

Related parties represent associated companies, shareholder, directors and key management personnel of the Bureau.Pricing policies and terms of these transactions are approved by the Bureau’s management.

Amounts due from and due to related parties are disclosed in notes 4 and 6, respectively.

Compensation of key management personnel

The remuneration of the members of key management during the year was as follows:2009 2008AED AED

Salaries 5,246,200 5,439,768Accommodation allowance 1,475,812 1,556,123Other benefits 661,458 700,478Related to employees’ end of service benefits 845,657 1,385,068

9 Licence fees

2009 2008AED AED

Licence fees received during the year, net 72,558,971 32,361,825Licence fees received in advance, net of receivable fees:

Beginning balance 125,000 –Ending balance (28,521,020) (125,000)

44,162,951 32,236,825


10 Fair values of financial instruments

Financial instruments comprise of financial assets and financial liabilities.

Financial assets consist of cash and bank balances and financial liabilities consist of payables.

The fair values of financial instruments are not materially different from their carrying values.

11 Risk management

Interest rate risk

The Bureau is exposed to interest rate risk on its interest bearing bank deposits.

Interest rate risk tableThe following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variablesheld constant, of the Bureau’s deficit (through the impact on floating rate deposits).

Assumed change in interest rates 0.50%

Impact on deficit from increase in interest rates:2009 (AED) 127,9312008 (AED) 8,437

Impact on deficit from decrease in interest rates:2009 (AED) (127,931)2008 (AED) (8,437)

Credit risk

The Bureau collects licence fees from its related parties. Licence fees are collected based on an annually forecast budget.

The Bureau limits its credit risk with regard to bank deposits by only dealing with reputable banks.

Credit risk is limited to the carrying values of financial assets in the statement of financial position.

Liquidity risk

The Bureau limits its liquidity risk by monitoring its current financial position in conjunction with its cash flow forecastsand close communication with ADWEA on a regular basis to ensure funds are available to meet its commitments forliabilities as they fall due.Accounts payable are normally settled within 30 days of the date of purchase.The contractualpayment terms of all financial liabilities of the Bureau as at 31 December 2009 were less than three months.



Given an ever increasing workload, we employed bothlocal and international consultants to undertake a rangeof work streams.

The consultants listed below were employed in 2009.

Alpha DataIT infrastructure Review

GHD Global Pty Ltd.Regulatory Impact Assessment (RIA) for Introduction ofWastewater Regulations

Dornier ConsultingAl Ain Groundwater Study

International Centre for Training and Development Training and examination on the Wiring Regulations 2007in Al Ain

Lloyds Register EMEAADSSC Health and Safety Management Review

Middle East Management and Economical DevelopmentTraining and examination on the Wiring Regulations 2007in Abu Dhabi

WS Atkins & Partners Oversees Chlorination System Evaluation ProjectTechnical evaluation of existing chlorination systems atproduction and network companies’ chlorination dosingsites: project duration 6 months

CONSULTANTS

The Regulation & Supervision BureauTel +971 2 4439333Fax +971 2 4439334PO Box 32800 Abu DhabiUnited Arab EmiratesEmail [email protected]

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annual report 2009

Documents

wastewater sector

electricity sector

wastewater regulations

water supply regulations

water production

emirate of abu dhabi

abu dhabi city

sale of water