TIDM92AJ
RNS Number : 6219O
Belfast Gas Transmission Fin PLC
01 July 2010
Belfast Gas Transmission Financing plc
Annual report
For the year ended 31 March 2010
Annual report for the year ended 31 March 2010
Pages
Directors and advisers
1
Operating and financial review
2 - 7
Directors' report
8 - 9
Independent auditors' report
10 - 11
Group statement of comprehensive income
12
Group and parent company balance sheets
13
Group and parent company cash flow statements
14
Notes to the financial statements
15 - 32
Directors and advisers
Directors
Felicity Huston
Patrick Larkin Executive Director
Gerard McIlroy Executive Director
Company secretary
Gerard McIlroy
Registered office
First Floor
The Arena Building
85 Ormeau Road
Belfast
BT7 1SH
Principal place of business
First Floor
The Arena Building
85 Ormeau Road
Belfast
BT7 1SH
Solicitors
Arthur Cox Northern Ireland
Capital House
3 Upper Queen Street
Belfast
BT1 6PU
Bankers
+-------------------------------------+
| Barclays Bank plc |
+-------------------------------------+
| Donegall House |
+-------------------------------------+
| Donegall Square North |
+-------------------------------------+
| Belfast |
+-------------------------------------+
| BT1 5LU |
+-------------------------------------+
Statutory auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Waterfront Plaza
8 Laganbank Road
Belfast
BT1 3LR
Operating and financial review for the year ended 31 March 2010
Business description
The Group ("Belfast Gas") was formed to own and operate the Belfast Gas
Transmission pipeline. The Belfast Gas Transmission pipeline, which was acquired
in March 2009 and was funded by a bond issue of GBP109m over a term of 40 years,
is a 24 inch diameter gas transmission pipeline which transports natural gas
from Ballylumford to Belfast.
Belfast Gas' principal stakeholders are the energy consumers of Northern Ireland
and the financiers of its bond. Its business is to provide a safe, reliable and
efficient transmission service to the gas systems of Northern Ireland and in
particular to the shippers of gas to Northern Ireland. Belfast Gas aims to
maximise value to its stakeholders through the provision of these services.
Belfast Gas manages the Belfast Gas Transmission pipeline on behalf of energy
consumers with all the benefits of the low cost of capital and operational
efficiencies being returned to energy consumers. In addition, proactive and
coordinated management of the Belfast Gas Transmission pipeline has meant that
further opportunities for operational savings have been identified and captured.
The quality of the service provided to our customers is determined by the
performance of the Belfast Gas Transmission pipeline in delivering high
availability gas transmission to gas shippers and to the gas systems of Northern
Ireland.
Belfast Gas receives its revenue from the postalised gas transmission system of
Northern Ireland (the "POT") and earns revenue for the POT through its capacity
and commodity sales to gas shippers.
Safety and reliability are critical to the operation of our business, we are
pleased to report that we have operated our gas assets without incident or lost
time injury and that our system has been fully available at all times.
External market environment
All the gas used in Northern Ireland is transported from Scotland in our
pipeline system and that of a fellow subsidiary undertaking, the Premier
Transmission Group ("Premier"). Belfast Gas and Premier provide a service to
shippers from Moffat in Scotland to exit points at Premier Power, Ballylumford,
the connection with BGE(NI) pipelines at Middle Division and Phoenix Exit points
in Belfast. The shippers who currently use our system are Centrica, Phoenix,
Premier Power, Coolkeeragh/ ESB, Firmus and Energia.
Gas volumes transported in our pipeline system decreased by 6% from the previous
year due to 9% less gas being used in Northern Ireland for power generation.
This decline in power generation usage of gas was a consequence of lower
electricity demand and a shift in power supply to generators in the Republic of
Ireland and imports across the Moyle interconnector.
The fall in the power generation demand was partially offset by a 6% increase in
gas demand in the non power (distribution) sector compared to the previous year.
Gas prices have remained depressed during 2009 primarily due to lower demand
caused by the global recession and the commissioning of additional gas supply
infrastructure in GB. Conversely oil prices have been steadily climbing from
their most recent autumn 2008 low. This differential in price has encouraged new
customers to connect to the network. This, combined with an unusually cold
winter, has increased demand on the distribution network.
The most recent network studies indicate that SNIP has the capacity to supply
Northern Ireland until at least the winter of 2015 /16, assuming no new power
generation.
EU "Second and Third Packages"
Regulation (EC) No 1775/2005 of the European Parliament concerning conditions
for access to the natural gas transmission networks requires TSO's to make
available cross border tariffs arrangements, additional capacity products,
(namely short term capacity products) and real time operational information.
Provision of such products will require changes to operational IT systems and
network code development. This work has not previously been progressed following
instruction from NIAUR as they anticipated that the requirements would be
addressed by the Common Arrangements for Gas project. Action on this is now
pressing.
Similarly Directive 2009/73/EC of the European Parliament and the council
concerning common rules for the internal market in natural gas is also on the
road to implementation. The Directive is a part of an energy liberalisation
package that represents a further major step towards the creation of a fully
competitive, liberalised internal market in natural gas in the European
Community. Whilst the Directive imposes many different requirements it is the
requirements relating to unbundling of the ownership of gas transmission which
will impact ourselves and to a greater extent BGE.
Operating and financial review for the year ended 31 March 2010 (continued)
External market environment (continued)
The first round of consultation has concluded, with submission by 1 February
2010, where we sought to convince that our transmission operations are fully
unbundled. The second stage will be a consultation on the implementation of all
aspects of the Directive (including transmission unbundling). It will take place
in Autumn 2010. The transmission unbundling requirements must be effective by 3
March 2012, with certification by NIAUR to demonstrate compliance by March 2011.
Future developments
The future operation of the gas transportation system in Ireland will be
dominated by the proposed convergence of the rules governing the gas markets in
Northern Ireland and the Republic of Ireland, known as the Common Arrangements
for Gas ("CAG"),and the overarching concerns for security of supply as the gas
market continues to grow.
The two Regulatory Authorities, the Northern Ireland Authority for Utility
Regulation in Northern Ireland and the Commission for Energy Regulation ("CER")
in the Republic, have prepared a "conclusions paper" recommending a single
Transmission System Operator and single Network Code. This is being considered
by their respective governments.
Regardless of whether this is implemented ROI and NI are legally obliged to
have in place a mechanism to allow shippers to trade gas across the South North
pipeline. Key decisions on single system operation and a combined network code
will need to be taken in the next few years and could change our business
significantly. We will work to ensure there is no increased risk to our
creditors, that all Ireland pipeline owners will have a similar status within
new arrangements, that costs do not increase for consumers in Northern Ireland
and that the benefits of our mutual business model are not eroded.
Following a request by Premier Transmission and the Northern Ireland
Authorities, the UK government have written to the Republic of Ireland
government, to exercise an option in the Irish Sea Interconnector Agreement,
allowing Northern Ireland an increase in capacity on fair commercial terms, from
2012. The impact of the exercise of this option would be to increase the maximum
volume of gas that Premier Transmission and Belfast Gas Transmission could
transport through the existing pipeline system. We are currently awaiting RoI
proposals for fair commercial terms however developments in CAG may impact on
the need for such ring fenced additional capacity.
Security of Supply is a fundamental government concern, driven by the increasing
reliance on gas as a provider of both electricity and domestic fuel in Ireland.
Diversification into liquefied natural gas, gas storage and oil and gas
exploration are being encouraged politically, to mitigate against the inevitable
increasing dependence on natural gas.
New local sources of gas supply could reduce the gas flowed from GB. The gas
network in Northern Ireland continues to grow with BGE's development of markets
along the route of their pipelines. All of NI's gas is still supplied by the
Premier Transmission Pipeline System (our two gas businesses, "PTPS") and that
system is more than capable of meeting demand assuming organic growth for the
foreseeable future. A new large customer such as a power station (Kilroot or
Quinns) would mean that additional supply capacity would be required. This could
be provided by the South North pipeline, accessing additional capacity in the
Moffat to Twynholm line for SNIP or from gas storage if it goes ahead.
In order to improve security of supply and increase the flexibility of gas
supply in an energy market with high levels of wind generation Mutual Energy,
the Group's parent company, has been closely involved in a project to develop a
500 million cubic metres natural gas salt cavity storage facility beneath Larne
Lough. A planning application for the project was submitted by Islandmagee
Storage Limited (ISML) on 23 March 2010. ISML is a joint venture between
Infrastrata UK Limited (65% shareholder) and fellow subsidiary Moyle Energy
Investments Limited (35% shareholder). Objectives for the coming year are to
achieve full planning consent, and agree licence terms, tariff arrangements, and
to develop a full shareholder agreement.
Forward-looking statements
The Chairman's Statement and Operating and Financial Review in the annual report
of Mutual Energy Limited contain forward-looking statements. Due to the inherent
uncertainties including both economic and business risk factors underlying such
forward-looking information, the actual results of operations, financial
position and liquidity may differ materially from those expressed or implied by
these forward-looking statements.
Operating and financial review for the year ended 31 March 2010 (continued)
Performance during the year
Environment and safety
Belfast Gas continues to put a high value on the safety of its operations and to
recognise the importance of minimising the impact of its activities on the
environment, both locally and in the global context.
Belfast Gas has delivered highly reliable energy transmission services to their
customers without lost time accidents or public safety incidents. They continue
to maintain regular contact with the landowners through whose land its pipelines
pass, to ensure that any land issues are addressed and that no works by others
are taking place in the vicinity of its installations.
Belfast Gas use significant quantities of gas for heating the gas transiting
through our pipelines prior to pressure reduction. The Group measures the
quantities used and sets targets to reduce these.
An improvement implemented in November 2009 on the pre heat gas process at
Twynholm made in conjunction with Bord Gais who own the site has meant there has
been no gas used over the recent winter period for pre heat gas usage. This will
be monitored going forward to quantify the cost savings for NI gas consumers.
Belfast Gas is committed to environmental performance, with no breach of any
environmental licence or permit recorded in the year. Usage of gas for pre
heating is monitored to help target improvements.
Operating company performance
Revenue and Profitability
Under Belfast Gas Transmission Limited's licence, the company's revenue is
regulated so as to match the Group's debt service costs and operating
expenditure in cash terms, with an annual reconciliation of actual to forecast
being agreed with the Northern Ireland Utility Regulator at the end of each gas
year (1st October). In the 2009 reconciliation, Belfast Gas Limited's costs
were broadly in line with forecast.
Being regulated in this way, Belfast Gas collects only the cash required to meet
its costs. As a result, although the business is cash generative and able to
meet its debt service obligations, it is not expected to be profitable for some
years.
The directors consider that the performance of the Belfast Gas Transmission
business is shown by its earnings before interest, taxation, depreciation and
amortisation (EBITDA) of GBP3.2m (2009: GBP3.2m).
Operational Performance
The booked capacity on the SNIP rose from 7.58 mscm in the first 6 months of the
2009/10 financial year to 7.63 mscm for the second 6 month period. This was in
response to growth in the distribution sector outside of the Greater Belfast
area. A total volume of 16,579 GWhs flowed through the SNIP in the 2009/10
financial year, down 6% on the previous year's figure of 17,602GWhs.
Although the annual demand decreased, the island of Ireland experienced an all
time peak day of gas usage on 7th January 2010, with Northern Ireland demand
being 6.7 mscm (74,731 MWhs), which is 88% of the total current booked capacity
on the pipeline. This was due to the extremely cold weather and the high
dispatch of the two NI power stations on the same day.
There have been no incidents or lost time injuries associated with gas business
operations and the gas transmission system was available for 100% of the time
year ending 31 March 2010.
The programme of works for the period focused on resilience of our systems,
particularly pre-heating, and some improvement work to the Belfast Gas pipeline
corridors. At Ballylumford a review of the design of waterbath heaters was
undertaken with the intention of reducing call outs.
To demonstrate continued fitness for purpose the pressure in our entire pipeline
system was raised to reaffirm its Maximum Permitted Operating Pressure (MPOP)
(recommended every 5 years).
During the year the process to retender the key Maintenance and Emergency
Response contract commenced with a view to formal invitation via the European
Journal in 2010.
Operating and financial review for the year ended 31 March 2010 (continued)
Operational performance (continued)
National Grid acting as the UK Network Emergency Coordinator (UK NEC), conducted
a two day simulated gas supply emergency exercise called "Exercise Quartz".
Premier Transmission Ltd and the Northern Ireland Network Emergency Co-ordinator
(NINEC) co-ordinated the exercise for the gas industry in the Northern Ireland,
as they would in the event of an actual NI Gas Supply Emergency. The exercise
simulated the load-shedding of gas at Moffat. DETI and NIAUR both attended the
exercise in our offices and both parties confirmed the exercise as beneficial to
their understanding of the emergency process and issues which arose. A debrief
with industry was coordinated to address any issues which arose and discuss
learning points.
Consumers' Returns and Receipts and employee matters
As a mutual energy company working for consumers, the directors continue to
consider it appropriate to report here any returns made to or receipts from the
energy consumers of Northern Ireland
Efficiency gains achieved by the gas business through reduction in its costs are
primarily returned to shippers by way of a year-end reconciliation payment. The
company's success in maximising its returns to and minimising receipts from
consumers is therefore reflected in the comparison between the forecast revenue
requirement submitted at the start of the gas year to the Northern Ireland
Utility Regulator and the actual outturn for the year. For the gas year ended
30th September 2009, the combined gas businesses actual required revenue was
GBP18.4m, against a forecast of GBP20.4m. GBP1.9m was returned to shippers in
January 2010, with GBP0.1m retained in the businesses.
The Company is committed to maintaining a high quality and committed workforce.
As such the company employs a personal performance evaluation system with
assessment of targets and training needs to encourage performance. Remuneration
is linked to performance throughout the organisation.
Key performance indicators (KPI's)
The directors have identified four groups of KPI's chosen to reflect what is
important to our stakeholders.
The Group's main business continues to be in the operation of regulated
debt-financed infrastructure assets. This business generates cash and is
structured to meet the requirements of its financiers and to minimise costs to
consumers. By its nature, it is not necessarily profitable in its early years.
While the Group strives towards profitability, its contribution to the energy
consumers of Northern Ireland is best measured by its cash returns to or
receipts from consumers.
Consumer financial benefit KPIs
The gas consumers of Northern Ireland provide Belfast Gas' required revenue
through the POT. For this financial year we consider the relevant KPI to be the
difference between the Forecast Required Revenue for the last gas year (ending
September 2009) and the Actual Required Revenue of that gas year. (consumer
benefit KPIs )
Operational performance KPI's
The quality of service to our direct customers is determined by the performance
of our assets, of which the principal measure is the availability of
transmission capacity. As availability should be at or close to 100%, the KPI
is expressed as its inverse, unavailability. As Belfast Gas provides the only
supply of gas to Northern Ireland, the directors have set a target of 0%
unavailability.
Financial KPI's
In addition to compliance with the respective financing covenants, the principal
requirements of the financiers are the maintenance of Annual Debt Service Cover
Ratios (ADSCR) of greater than 1.2. These calculations are based upon specific
methodologies outlined in the relevant collateral deeds with the information
sourced from the Group's management accounts.
Corporate responsibility KPI's
The Group's contribution to society is focused on the safe and efficient
operation of vital infrastructure in a cost efficient manner. Cost efficiency
impacts upon the ability to return cash to customers (consumer benefit KPI's)
and on the financial performance. Safe and efficient operation is measured with
reference to the operational performance KPI's and the corporate responsibility
KPI's. These aim to measure both the absolute performance (availability) and the
environmental and safety impact of achieving this performance (corporate
responsibility).
Operating and financial review for the year ended 31 March 2010 (continued)
Key performance indicators (KPI's) (continued)
Note: The KPIs in table 1,2 and 4 relate to Belfast Gas and Premier combined.
KPI table 1
+----------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------------------+---------+---------+
| Consumer benefits | | |
+----------------------------------------------------+---------+---------+
| Gas business saving against Forecast Required | 2.0m |GBP1.8m |
| Revenue ( by gas year) | | |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| The KPI for gas business operational savings is calculated by |
| subtracting the actual agreed revenue for the gas year, calculated in |
| accordance with the gas companies' licences, from the forecast |
| required revenue submitted in advance of the year. |
| |
| This is a measure of operational efficiency. |
| |
+------------------------------------------------------------------------+
| KPI table 2 | | |
+----------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------------------+---------+---------+
| Operational Performance | | |
+----------------------------------------------------+---------+---------+
| Unavailability | 0% | 0% |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
Availability is the key measure of operating performance.
For the gas businesses availability has been 100% throughout the entire period
of their ownership by the mutual energy group.
+----------------------------------------------------+---------+---------+
| KPI table 3 | | |
+----------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------------------+---------+---------+
| Financial performance | | |
+----------------------------------------------------+---------+---------+
| ADSCR | 1.97 | 2.29 |
+----------------------------------------------------+---------+---------+
| |
| The Annual Debt Service Cover Ratios are calculated in accordance with |
| the terms of the bonds for each operational company. |
| |
| The basis of calculation is Available Cash / Debt Service in the next |
| 12 months. |
| |
| In each case Available Cash = the difference between income and |
| expenses in the period + cash in designated bank accounts, where cash |
| in the designated bank accounts is limited to 1x Debt service. |
| |
| The ADSCR for both Belfast Gas and Premier will tend to average |
| towards 2.0. Over-performance above 2.0 in the 2006 to 2009 period was |
| driven by interest income and some operational savings retained in |
| accordance with the licences. In the future years when this cash is |
| released to the benefit of consumers there will be a consequential |
| fall in the ADSCR below 2.0. |
+------------------------------------------------------------------------+
| | | |
| KPI table 4 | | |
+----------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------------------+---------+---------+
| Corporate Responsibility | | |
+----------------------------------------------------+---------+---------+
| Lost time and reportable accidents | 0 | 0 |
+----------------------------------------------------+---------+---------+
| Usage of gas in operations | 4,266 | 5,096 |
| | mwh | mwh |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
Operating and financial review for the year ended 31 March 2010 (continued)
Financial position and financial management
Revenue, profitability and reserves
Group revenue in the period to 31 March 2010 was GBP4.6m (2009: GBP4.7m). Group
operating loss before interest and tax was GBP0.3m (2009: GBP0.2m). After
accounting for debt service, the Group made an after-tax loss of GBP5.2m (2009:
GBP2.0m)
Belfast Gas was cash generative during the year and is required to hold high
levels of cash reserves as conditions of its financing arrangements. Cash
reserves in Belfast Gas Transmission amounted to GBP6.9m .
Debt Service and Liquidity
Under their respective financing documents, the ongoing ability of all the core
regulated business to meet its debt service obligations is measured by the ADSCR
at the level of the licence holding entity. For the year under review, the
ADSCRs, calculated by comparing the actual cash flows with the debt service
payments which they funded in accordance with the methodology dictated by the
financing agreement, were 1.97 against a required figure of 1.20 for Belfast
Gas.
The Group has low liquidity risk due to its strong cash flows and the reserve
accounts and liquidity facilities required by its financing documents. The
required reserve accounts were fully funded and liquidity facilities were in
place throughout the year.
Treasury
Belfast Gas' only borrowings are the Index Linked Guaranteed Secured Bonds 2048
issued by Belfast Gas Transmission Financing plc. The purpose of this
arrangement is to manage the index risk arising from the Group's sources of
long-term finance.
The Group's treasury policies, determined by the terms of its long-term bond
financing, are aimed at minimising the risks associated with the Group's
financial assets and liabilities. Where the Group provides its transmission
services on deferred terms to parties who do not hold an appropriate credit
rating, security cover is required. The cash reserves of the Group are held in
interest-bearing accounts or invested in fixed term deposits of up to one year
spread across a panel of approved banks and financial institutions having high
credit ratings.
Interest received for the period was GBP0.1m (2009: GBP0.3m).
Resources and relationships
The business of the Group has been stable throughout the year and the directors
continue to believe that the debt-financed and outsourced model is appropriate
to that business. The directors consider that the management arrangements,
together with the Group's relationships with its professional advisers and
appropriate insurance arrangements continue to be robust against management
contingencies and effective in succession terms.
The Group holds significant cash resources on its balance sheet. The directors
continue to seek investment opportunities which will ensure that these resources
will be used in ways which are in the long-term interests of the energy
consumers of Northern Ireland, with a risk profile which is appropriate to the
nature of the Group.
For most of its business activities, the Group relies on its network of
professional advisers and contractors. While ensuring that contracts are at
market rates, the Group aims to build relatively long-term relationships of the
order of five years.
During the year, the Group ensured compliance with the terms of the financing of
its regulated subsidiary and continued to maintain good relations with the
respective bond financiers, represented by Assured Guaranty (Europe) Limited as
controlling creditor and Prudential Trustee Company Limited.
Belfast Gas Transmission Ltd, the operating company of the Group, is regulated
under the terms of their gas conveyance licence and the directions issued by the
Utility Regulator under the licence. The Group aims to work closely with the
Utility Regulator to build a long-term co-operative relationship in the interest
of consumers and, to this end, meets regularly with the Utility Regulator at
various levels.
Belfast Gas Transmission Pipeline System
Operation and maintenance of Belfast Gas Transmission assets, is carried out by
the Premier Transmission management team, using the same key contractors and
harmonised processes and procedures.
Directors' report for the year ended 31 March 2010
The directors present their report and the audited financial statements for the
year ended 31 March 2010.
Principal activity, review of the business and key performance indicators
The group's principal activity during the year was the financing and operation
through its subsidiary of the Belfast Gas Transmission Pipeline which transports
gas from Ballylumford to Greater Belfast and Larne. It is the intention of the
directors to continue to maintain the efficient and effective operation of the
pipe line. The Operating and Financial Review on pages 2 to 7 of these financial
statements provides a review of the business, future developments and its key
performance indicators for the Belfast Gas Transmission Financing plc group and
is therefore incorporated into this report by cross reference.
Results and dividends
The group's loss for the year is GBP5,169,000 (2009: GBP1,978,000). The
directors do not recommend the payment of a dividend (2009: GBPnil).
Directors
The directors who served the group during the year were:
Alan McClure (Resigned 29 September 2009)
Felicity Huston
Damian McAteer (Resigned 29 September 2009)
William Cargo (Resigned 1 January 2010)
Patrick Larkin
Gerard McIlroy (Appointed 1 January 2010)
Financial risk management
Please refer to note 1 to these financial statements for a description of the
financial risks that the group faces and how it addresses those risks.
Political and charitable donations
No political or charitable donations have been made during the year (2009:
GBPnil).
Payment of suppliers
The group's procurement policy is to source equipment, goods and services from a
wide range of suppliers in accordance with commercial practices based on
fairness and transparency.
The group recognises the important role that suppliers play in its business and
works to ensure that payments are made to them in accordance with agreed
contract terms.
The group had trade payable days of 6 days at 31 March 2010 (2009: 18 days). The
group intends to continue to meet the payment terms contained in its agreements
with suppliers.
Directors' report for the year ended 31 March 2010 (continued)
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the group and parent
company financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. Under company law
the directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
group and the company and of the profit or loss of the group for that period.
In preparing these financial statements, the directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable IFRSs as adopted by the European Union have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the company's transactions and disclose with
reasonable accuracy at any time the financial position of the company and the
group and enable them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the group financial statements, Article 4 of
the IAS Regulation. They are also responsible for safeguarding the assets of the
company and the group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the company's
website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Statement of disclosure of information to auditors
So far as each of the directors in office at the date of approval of these
financial statements is aware:
· there is no relevant audit information of which the group and parent
company's auditors are unaware; and
· they have taken all the steps that they ought to have taken as directors
in order to make themselves aware of any relevant audit information and to
establish that the group and parent company's auditors are aware of that
information.
Independent auditors
PricewaterhouseCoopers LLP have indicated their willingness to continue in
office, and a resolution concerning their reappointment will be proposed at the
Annual General Meeting.
By order of the Board
Gerard McIlroy
Company secretary
23 June 2010
Independent auditors' report to the members of Belfast Gas Transmission
Financing plc
We have audited the group and parent company financial statements ("financial
statements") of Belfast Gas Transmission Financing plc for the year ended 31
March 2010 which comprise the group statement of comprehensive income, the group
and parent company balance sheets and the group and parent company cash flow
statements and the related notes. The financial reporting framework that has
been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the
parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statement set out on
page 9, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only for the
company's members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the group's and the parent company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the
financial statements.
Opinion on financial statements
In our opinion:
· the financial statements give a true and fair view of the state of the
group's and of the parent company's affairs as at 31 March 2010 and of the
group's loss and group's and parent company's cash flows for the year then
ended;
· the group financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union;
· the parent company financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the lAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial
year for which the financial statements are prepared is consistent with the
financial statements.
Independent auditors' report to the members of Belfast Gas Transmission
Financing plc (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not visited
by us; or
· the parent company financial statements are not in agreement with the
accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are not
made; or
· we have not received all the information and explanations we require for
our audit
Kevin MacAllister (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Belfast
30 June 2010
Group statement of comprehensive income for the year ended 31 March 2010
+------------------------------------------+-------+----------+----------+
| | | 2010 | 2009 |
+------------------------------------------+-------+----------+----------+
| |Notes | GBP'000 | GBP'000 |
+------------------------------------------+-------+----------+----------+
| Revenue - continuing operations | | 4,563 | 4,741 |
+------------------------------------------+-------+----------+----------+
| Operating costs | 2 | (4,824) | (4,934) |
+------------------------------------------+-------+----------+----------+
| Earnings before depreciation and | | 3,180 | 3,247 |
| amortisation of intangible assets | | | |
+------------------------------------------+-------+----------+----------+
| Amortisation of intangible assets | | (2,487) | (2,487) |
+------------------------------------------+-------+----------+----------+
| Depreciation (net of amortisation of | | (954) | (953) |
| government grants) | | | |
+------------------------------------------+-------+----------+----------+
| Operating loss | | (261) | (193) |
+------------------------------------------+-------+----------+----------+
| Finance income | 4 | 62 | 284 |
+------------------------------------------+-------+----------+----------+
| Finance costs | 4 | (6,642) | (2,839) |
+------------------------------------------+-------+----------+----------+
| Finance costs - net | 4 | (6,580) | (2,555) |
+------------------------------------------+-------+----------+----------+
| Loss before income tax | | (6,841) | (2,748) |
+------------------------------------------+-------+----------+----------+
| Income tax credit | 5 | 1,672 | 770 |
+------------------------------------------+-------+----------+----------+
| Loss for the year | 13 | (5,169) | (1,978) |
+------------------------------------------+-------+----------+----------+
The notes on pages on pages 15 to 32 are an integral part of these group
financial statements.
Group and parent company balance sheets as at 31 March 2010
+------------------------+-------+---------+---------+---------+---------+
| | | Group | Company |
+------------------------+-------+-------------------+-------------------+
| | | 2010 | 2009 | 2010 | 2009 |
+------------------------+-------+---------+---------+---------+---------+
| |Notes | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+-------+---------+---------+---------+---------+
| Assets | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Non current assets | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Property, plant and | 7 | 35,997 | 37,239 | - | - |
| equipment | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Intangible assets | 8 | 104,439 | 106,926 | - | - |
+------------------------+-------+---------+---------+---------+---------+
| Investment in | 9 | - | - | 112,384 | 112,384 |
| subsidiary undertaking | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Deferred income tax | 15 | 225 | - | - | - |
| assets | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| | | 140,661 | 144,165 | 112,384 | 112,384 |
+------------------------+-------+---------+---------+---------+---------+
| Current assets | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Trade and other | 10 | 1,649 | 1,071 | 51 | 41 |
| receivables | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Cash and cash | 11 | 6,923 | 6,644 | 1,307 | 1,314 |
| equivalents | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| | | 8,572 | 7,715 | 1,358 | 1,355 |
+------------------------+-------+---------+---------+---------+---------+
| Total assets | | 149,233 | 151,880 | 113,742 | 113,739 |
+------------------------+-------+---------+---------+---------+---------+
| | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Equity | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Ordinary shares | 12 | 50 | 50 | 50 | 50 |
+------------------------+-------+---------+---------+---------+---------+
| Retained earnings | 13 | (7,147) | (1,978) | 8 | 3 |
+------------------------+-------+---------+---------+---------+---------+
| Total equity | | (7,097) | (1,928) | 58 | 53 |
+------------------------+-------+---------+---------+---------+---------+
| | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Liabilities | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Non current | | | | | |
| liabilities | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Borrowings | 14 | 111,463 | 108,143 | 111,463 | 108,143 |
+------------------------+-------+---------+---------+---------+---------+
| Deferred income tax | 15 | 35,017 | 35,737 | - | - |
| liabilities | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Government grant | 16 | 8,062 | 8,350 | - | - |
+------------------------+-------+---------+---------+---------+---------+
| | | 154,542 | 152,230 | 111,463 | 108,143 |
+------------------------+-------+---------+---------+---------+---------+
| Current liabilities | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Trade and other | 17 | 851 | 735 | 1,572 | 4,988 |
| payables | | | | | |
+------------------------+-------+---------+---------+---------+---------+
| Borrowings | 14 | 649 | 555 | 649 | 555 |
+------------------------+-------+---------+---------+---------+---------+
| Government grant | 16 | 288 | 288 | - | - |
+------------------------+-------+---------+---------+---------+---------+
| | | 1,788 | 1,578 | 2,221 | 5,543 |
+------------------------+-------+---------+---------+---------+---------+
| Total liabilities | | 156,330 | 153,808 | 113,684 | 113,686 |
+------------------------+-------+---------+---------+---------+---------+
| Total equity and | | 149,233 | 151,880 | 113,742 | 113,739 |
| liabilities | | | | | |
+------------------------+-------+---------+---------+---------+---------+
The notes on pages 15 to 32 are an integral part of these group financial
statements.
The group financial statements on pages 12 to 32 were authorised for issue by
the Board of Directors on 23 June 2010 and were signed on its behalf by:
+-------------------------------------+-------------------------------------+
| Patrick Larkin | Felicity Huston |
+-------------------------------------+-------------------------------------+
| Director | Director |
| | |
+-------------------------------------+-------------------------------------+
Belfast Gas Transmission Financing plc
Registered number: NI 067348
Group and parent company cash flow statements for the year ended 31 March 2010
+----------------------------------+-------+---------+------------+---------+-----------+
| | | Group | Company |
+----------------------------------+-------+----------------------+---------------------+
| | | 2010 | 2009 | 2010 | 2009 |
+----------------------------------+-------+---------+------------+---------+-----------+
| |Notes | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+-------+---------+------------+---------+-----------+
| Cash flows from operating | | | | | |
| activities | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Loss before income tax and | | (261) | (193) | (14) | (5) |
| finance costs | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Adjustments for: | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Depreciation of property, plant | | 1,242 | 1,241 | - | - |
| and equipment | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Amortisation of government grant | | (288) | (288) | - | - |
+----------------------------------+-------+---------+------------+---------+-----------+
| Amortisation of intangible | | 2,487 | 2,487 | - | - |
| assets | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Movement in trade and other | | 86 | 9,139 | (10) | (41) |
| receivables | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Movement in trade and other | | 179 | (8,689) | 11 | (4,150) |
| payables | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Net cash generated from /(used | | 3,445 | 3,697 | (13) | (4,196) |
| in) operating activities | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Cash flows from investing | | | | | |
| activities | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Interest received | | 62 | 284 | 3,234 | 2,847 |
+----------------------------------+-------+---------+------------+---------+-----------+
| Acquisition of subsidiaries, net | | - | (103,247) | - | (103,247) |
| of cash acquired | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Net cash generated from /(used | | 62 | (102,963) | 3,234 | (100,400) |
| in) investing activities | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Cash flows from financing | | | | | |
| activities | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Interest paid | | (2,659) | (2,647) | (2,659) | (2,647) |
+----------------------------------+-------+---------+------------+---------+-----------+
| Proceeds from issue of share | | - | 50 | - | 50 |
| capital | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Repayment of borrowings | | (569) | (493) | (569) | (493) |
+----------------------------------+-------+---------+------------+---------+-----------+
| Proceeds from borrowings | | - | 109,000 | - | 109,000 |
+----------------------------------+-------+---------+------------+---------+-----------+
| Net cash (used in)/generated | | (3,228) | 105,910 | (3,228) | 105,910 |
| from financing activities | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Movement in cash and cash | | 279 | 6,644 | (7) | 1,314 |
| equivalents | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Cash and cash equivalents at the | 11 | 6,644 | - | 1,314 | - |
| beginning of the year | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
| Cash and cash equivalents at the | 11 | 6,923 | 6,644 | 1,307 | 1,314 |
| end of the year | | | | | |
+----------------------------------+-------+---------+------------+---------+-----------+
The notes on pages 15 to 32 are an integral part of these group financial
statements.
Notes to the financial statements for the period ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting estimates/judgements
General information
The group's principal activity during the year was the financing and operation
through its subsidiary of the Belfast Gas Transmission Pipeline which transports
gas from Ballylumford to Greater Belfast and Larne. The company is incorporated
and domiciled in Northern Ireland.
The financial statements are presented in Sterling and all values are rounded to
the nearest thousand pounds (GBP'000) except when otherwise indicated. All of
the group and company's assets and liabilities are denominated in Sterling.
These financial statements were authorised for issue by the board of directors
on 23 June 2010 and were signed on their behalf by Patrick Larkin and Felicity
Huston. The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of Belfast Gas Transmission Financing plc
have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union, IFRIC Interpretations and the
Companies Act 2006 applicable to companies reporting under IFRS. The
consolidated financial statements have been prepared under the historical cost
convention. The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the group's
accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed on page 22.
Going concern
The group has recurring accounting losses and accordingly net liabilities. In
view of the structure of the group's initial set up including the acquisition of
Belfast Gas Transmission Limited and the issuing of a bond, this is a situation
which will prevail for potentially 20 years. However the group is cash
generative and is forecast to remain cash positive over that 20 year period. The
forecast cash generated is adequate to meet the group's liabilities as they fall
due over the next 12 months including the scheduled partial repayment of bond
capital and interest. In the unlikely event that a change in circumstances
results in the group being short of adequate cash to service the bond an
arrangement approved by the Northern Ireland Authority for Utility Regulation
would be triggered which would ensure bond payments are made. Accordingly in
view of the above the Directors consider it appropriate to adopt the going
concern basis in the preparation of the accounts.
Notes to the financial statements for the period ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting estimates/judgements (continued)
Standards, amendments and interpretations effective in the year ended 31 March
2010 and that are relevant to the group and parent company
The following standards, amendments and interpretations to published standards
are effective for the year ended 31 March 2010 and are relevant to the group's
or parent company's operations:
· IAS 1 Revised - This revised standard requires entities to prepare a
statement of comprehensive income. All non-owner changes in equity are required
to be shown in a performance statement, but entities can choose whether to
present one performance statement (the statement of comprehensive income) or two
statements (the income statement and statement of comprehensive income). Owner
changes in equity are shown in a statement of changes in equity. In addition,
entities making restatements or reclassifications of comparative information are
required to present a restated balance sheet as at the beginning of the
comparative period in addition to the current requirement to present balance
sheets at the end of the current period and comparative period;
· IFRS 8 - This standard replaces IAS 14 and aligns segment reporting with
the requirements of the US standard SFAS 131, 'Disclosures about segments of an
enterprise and related information'. This new standard uses a 'management
approach', under which segment information is presented on the same basis as
that used for internal reporting purposes; and
· Amendment to IFRS 7 - This amendment forms part of the IASB's response to
the financial crisis and addresses the G20 conclusions aimed at improving
transparency and enhancing accounting guidance. The amendment increases the
disclosure requirements about fair value measurement and reinforces existing
principles for disclosure about liquidity risk. The amendment introduces a
three-level hierarchy for fair value measurement disclosure and requires some
specific quantitative disclosures for financial instruments in the lowest level
in the hierarchy. In addition, the amendment clarifies and enhances existing
requirements for the disclosure of liquidity risk primarily requiring a separate
liquidity risk analysis for derivative and non-derivative financial liabilities.
Standards, amendments and interpretations effective in the year ended 31 March
2010 and that are not relevant to the group and parent company
The following standards, amendments and interpretations to published standards
are effective for the year ended 31 March 2010 but they are not relevant to the
group's or parent company's operations:
+------------------+
| International |
| Accounting |
| Standards |
| (IAS/IFRSs) |
+------------------+
| |
+------------------+
| |
| IAS 32 |
| (A) |
| Amendment |
| to |
| financial |
| instruments: |
| presentation |
+------------------+
| |
| IAS 23 |
| (R) |
| Borrowing |
| costs |
| (revised) |
+------------------+
| |
| IAS |
| 32/IFRS |
| 7 (A) |
| Amendment |
| to |
| financial |
| instruments: |
| reclassification |
+------------------+
| |
| IFRIC |
| 9/IA S |
| 39 (A) |
| Amendment |
| to |
| financial |
| instruments: |
| embedded |
| derivatives |
+------------------+
| |
| IFRS 1 |
| Amendment |
| to first |
| time |
| adoption |
| of IFRS |
+------------------+
| |
| IFRS 2 |
| Amendment |
| to share |
| based |
| payments: |
| vesting |
| conditions |
+------------------+
| |
+------------------+
| International |
| Financial |
| Reporting |
| Interpretation |
| Committee |
| (IFRICs) |
+------------------+
| |
+------------------+
| |
| IFRIC |
| 12 |
| Service |
| concession |
| arrangements |
| IFRIC 13 |
| Customer |
| loyalty |
| programmes |
+------------------+
| |
| IFRIC |
| 15 |
| Agreements |
| for the |
| construction |
| of real |
| estate |
+------------------+
| |
| IFRIC |
| 16 |
| Hedges |
| of a |
| net |
| investment |
| in a |
| foreign |
| investment |
| |
| |
| |
| |
| |
| |
+------------------+
Notes to the financial statements for the period ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting estimates/judgements (continued)
Standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted
During the year, the IASB and IFRIC have issued the following accounting
standards and interpretations with an effective date after the date of these
financial statements (i.e. applicable to accounting periods beginning on or
after the effective date). The directors do not anticipate that the adoption of
these standards and interpretations will have a material impact on the group's
financial statements in the period of initial application:
+----------------+-----------+
| |Effective |
| | date |
+----------------+-----------+
| International | |
| Accounting | |
| Standards | |
| (IAS/IFRSs) | |
+----------------+-----------+
| | |
+----------------+-----------+
| | 1 July |
| IAS 24 | 2009 |
| (A) | (*) |
| Amendment | |
| to | |
| Related | |
| party | |
| disclosures | |
+----------------+-----------+
| | 1 July |
| IAS 27 | 2009 |
| (R) | |
| Consolidated | |
| and separate | |
| financial | |
| statements | |
| (revised) | |
+----------------+-----------+
| | 1 |
| IFRS 9 | January |
| Financial | 2009 |
| instruments | (*) |
+----------------+-----------+
| | 1 |
| IAS 32 | February |
| (A) | 2010 |
| Amendment | |
| to | |
| financial | |
| instruments: | |
| presentation | |
| on | |
| classification | |
| of rights | |
| issues | |
+----------------+-----------+
| | 1 July |
| IAS 39 | 2009 |
| (A) | (*) |
| Amendment | |
| to | |
| financial | |
| instruments: | |
| eligible | |
| hedged items | |
+----------------+-----------+
| | 1 |
| IFRS 2 | January |
| (A) | 2010 |
| Amendment | |
| to share | |
| based | |
| payments: | |
| group | |
| cash-settled | |
| transactions | |
+----------------+-----------+
| | 1 July |
| IFRS 3 | 2009 |
| (R) | |
| Business | |
| combinations | |
| (Revised) | |
+----------------+-----------+
| International | |
| Financial | |
| Reporting | |
| Interpretation | |
| Committee | |
| (IFRICs) | |
+----------------+-----------+
| | |
+----------------+-----------+
| | 1 |
| IFRIC | January |
| 14 (A) | 2011 |
| Amendment | |
| to IAS 19 | |
+----------------+-----------+
| | 1 July |
| IFRIC | 2009 |
| 17 | |
| Distributions | |
| of non cash | |
| assets to | |
| owners | |
+----------------+-----------+
| | 31 |
| IFRIC | October |
| 18 | 2009 |
| Transfer | |
| of | |
| assets | |
| from | |
| customers | |
+----------------+-----------+
| | 1 July |
| IFRIC | 2010 |
| 19 | (*) |
| Extinguishing | |
| financial | |
| liabilities | |
| with equity | |
| instruments | |
+----------------+-----------+
(*) not yet adopted by the European Union.
Basis of consolidation
The group financial statements consolidate the financial statements of Belfast
Gas Transmission Financing plc and its subsidiary undertaking drawn up to 31
March 2010. Subsidiaries are entities that are directly or indirectly
controlled by the group. Control exists where the group has the power to govern
the financial and operating policies of the entity so as to obtain benefits from
its activities. In assessing control, potential voting rights that are currently
exercisable or convertible are taken into account.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
group's share of the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the group.
Segment reporting
The group has one business segment, the selling of capacity for the transmission
of gas to Greater Belfast and Larne and one geographical segment, the United
Kingdom. Accordingly segment reporting is not deemed to be applicable.
Notes to the financial statements for the period ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting estimates/judgements (continued)
Investments
Investments are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
Revenue
Revenue comprises the fair value of the consideration received or receivable
from the sale of capacity on the Belfast Gas Transmission Pipeline which
transports gas to Greater Belfast and Larne. All revenue is generated within the
United Kingdom. Revenue is shown net of value-added tax, returns, rebates and
discounts and after eliminating sales within the group. Revenue is recognised
over the period for which capacity is provided, using a straight line basis over
the term of the agreement. The group recognises revenue when the amount of
revenue can be reliably measured and it is probable that future economic
benefits will flow to the entity.
Intangible assets
Licences acquired on acquisitions are recognised initially at fair value.
Licences have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method to
allocate the cost of licences over their estimated useful lives. The remaining
estimated useful lives of the licences are 42 years.
Property, plant and equipment
Property, plant and equipment is stated at cost less depreciation and
accumulated impairment losses. The initial cost of an asset comprises cost plus
any costs directly attributable to bringing the asset into operation and an
estimate of any decommissioning costs.
Subsequent costs are included in the asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the group and the cost of the
item can be measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
The charge for depreciation is calculated so as to write off the depreciable
amount of assets over their estimated useful economic lives on a straight line
basis. The lives of each major class of depreciable asset are as follows:
Pipeline
31 years
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable amount.
An asset is derecognised upon disposal or when no future economic benefit is
expected to arise from the asset.
Impairment of non-financial assets
The group assesses at each reporting date whether there is an indication that an
asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the group makes an estimate of the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value in use and is
determined for an individual asset. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the
risks specific to the asset. Impairment losses of continuing operations are
recognised in the income statement in those expense categories consistent with
the function of the impaired asset.
Notes to the financial statements for the period ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting estimates/judgements (continued)
Classification of financial instruments
The group classifies its financial assets as loans and receivables. The
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at
initial recognition.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are included
in current assets, except for maturities greater than 12 months after the end of
the reporting period. These are classified as non-current assets. The group's
loans and receivables comprise 'trade and other receivables' and cash and cash
equivalents in the balance sheet.
Loans and receivables (financial instruments)
(a) Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for impairment of trade and other
receivables is established when there is objective evidence that the group will
not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganisation, and default or
delinquency in payments are considered indicators that the trade and other
receivable is impaired. The amount of the provision is the difference between
the asset's carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The carrying amount
of the asset is reduced through the use of an allowance account, and the amount
of the loss is recognised in the income statement within 'operating costs'. When
a trade and other receivable is uncollectible, it is written off against the
allowance account for trade receivables. Subsequent recoveries of amounts
previously written off are credited against 'operating costs' in the income
statement.
Trade and other receivables with a maturity of more than twelve months from the
balance sheet date are shown as non-current trade and other receivables.
(b) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less.
Impairment of financial assets
The group assesses at the end of each reporting period whether there is
objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of
the asset (a 'loss event') and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets
that can be reliably estimated.
The criteria that the group uses to determine that there is objective evidence
of an impairment loss include:
· significant financial difficulty of the issuer or obligor;
· a breach of contract, such as a default or delinquency in interest or
principal payments;
· the group, for economic or legal reasons relating to the borrower's
financial difficulty, granting to the borrower a concession that the lender
would not otherwise consider;
· it becomes probable that the borrower will enter bankruptcy or other
financial reorganisation;
· the disappearance of an active market for that financial asset because of
financial difficulties; or
· observable data indicating that there is a measurable decrease in the
estimated future cash flows from a portfolio of financial assets since the
initial recognition of those assets, although the decrease cannot yet be
identified with the individual financial assets in the portfolio, including i)
adverse changes in the payment status of borrowers in the portfolio; and ii)
national or local economic conditions that correlate with defaults on the assets
in the portfolio.
Notes to the financial statements for the year ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting
estimates/judgements (continued)
Impairment of financial assets (continued)
The group first assesses whether objective evidence of impairment exists. The
amount of the loss is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset's
original effective interest rate. The carrying amount of the asset is reduced
and the amount of the loss is recognised in the consolidated income statement.
If a loan or held-to-maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. As a practical expedient, the group
may measure impairment on the basis of an instrument's fair value using an
observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised (such as an improvement in the debtor's credit rating), the
reversal of the previously recognised impairment loss is recognised in the
consolidated income statement.
Ordinary shares
Ordinary shares are classified as equity.
Other financial liabilities at amortised cost (financial instruments)
(a) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
(b) Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Income tax and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is
recognised in the income statement.
Current income tax assets and liabilities are measured at the amount expected to
be recovered from or paid to the taxation authorities, based on tax rates and
laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither an accounting
nor a taxable profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries, except where the timing of the reversal of the temporary
difference is controlled by the group and it is probable that the temporary
difference will not reverse in the foreseeable future. Income tax is charged or
credited directly to equity if it relates to items that are credited or charged
to equity. Otherwise income tax is recognised in the income statement.
Notes to the financial statements for the year ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting
estimates/judgements (continued)
Government grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the group will comply
with all attached conditions.
Government grants relating to costs are deferred and recognised in the income
statement over the period necessary to match them with the costs they are
intended to compensate.
Government grants relating to property, plant and equipment are included in non
current liabilities as deferred government grants and are credited to the income
statement on a straight line basis over the expected useful economic lives of
the related assets.
Operating lease commitments
Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
Pensions and other post-retirement benefits
The group contributes to individual's personal pension schemes. Contributions
are recognised in the income statement in the period in which they become
payable.
Foreign currency translation
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
Financial risk management
Financial risk factors
The group operates the gas pipeline which links the gas transmission systems of
Northern Ireland and Scotland under a licence agreement with the Northern
Ireland Authority for Utility Regulation. Under the licence agreement the group
receives revenue that compensates it for its operating expenses, financing costs
and repayment of borrowings. Accordingly the group has limited financial risk.
(a) Market risk
The group's interest rate cash flow risk arises from its long term borrowings.
The group issued its long term borrowings to refinance its transmission assets
at the lowest possible rates in order to reduce the costs of transmission to the
consumers of Northern Ireland. Its long term borrowings were issued at rates
linked to the Retail Price Index. The group's long term borrowings are therefore
susceptible to changes in the Retail Price Index. A change in the Retail Price
Index by 1 basis point would have increased finance costs during the year by
GBP1,073,000.
Under the terms of its licence agreement the group receives sufficient revenue
to settle its operating costs and its repayments of borrowings. Accordingly the
group does not need to actively manage its exposure to cash flow interest rate
risk.
Notes to the financial statements for the year ended 31 March 2010
1 Accounting policies, financial risk management & critical accounting
estimates/judgements (continued)
Financial risk management (continued)
(b) Credit risk
Under the group's licence agreement it receives revenue that compensates the
group for its operating expenses, financing costs and repayment of borrowings.
Accordingly the group has limited liquidity risk. The Group also retains
significant cash reserves and a liquidity facility with an A - rated bank to
manage any short term liquidity risk. The undiscounted contractual maturity
profile of the group's borrowings is shown in note 20.
Capital risk management
The group has no obligation to increase members' funds as the company's ultimate
parent undertaking is a company limited by guarantee. The group's management of
its borrowings and credit risk is referred to in the preceding paragraphs.
Fair value estimation
Effective 1 January 2009, the group adopted the amendment to IFRS 7 for
financial instruments that are measured in the balance sheet at fair value, this
requires disclosure of fair value measurements by level of the following fair
value measurement hierarchy:
· Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1);
· Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2); and
· Inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs) (level 3).
The group's financial instruments fair valued (for disclosure purposes only)
under level 2 are the group's borrowings. The fair value of these financial
instruments is determined by discounting future cash flows using a suitable
discount rate. These discount rates are based on Bank of England UK gilt yield
curve data for a term that is similar to the financial instrument
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities within the
next financial year are discussed below:
(a) Estimate of useful economic life of assets
The group assesses the useful economic life of assets on an annual basis. The
remaining useful economic life of the pipeline was determined as approximately
30 years at the beginning of the year. If the remaining useful economic life had
been assessed at 31 years depreciation would have decreased by GBP40,000 and if
the remaining useful economic life had been assessed at 29 years depreciation
would have increased by GBP43,000.
Notes to the financial statements for the year ended 31 March 2010
2 Expenses by nature
+--------------+---------+---------+
| | 2010 | 2009 |
+--------------+---------+---------+
| Group | GBP'000 | GBP'000 |
+--------------+---------+---------+
| Depreciation | 3,441 | 3,440 |
| and | | |
| amortisation | | |
| (net of | | |
| amortisation | | |
| of | | |
| government | | |
| grants) | | |
+--------------+---------+---------+
| Operating | 12 | 12 |
| lease | | |
| payments | | |
+--------------+---------+---------+
| Fees | | |
| payable | 15 | 11 |
| to the | | |
| company's | | |
| auditor | | |
| in | | |
| respect | | |
| of the | | |
| audit of | | |
| the | | |
| company's | | |
| financial | | |
| statements | | |
+--------------+---------+---------+
| Other | 1,356 | 1,471 |
| expenses | | |
+--------------+---------+---------+
| Total | 4,824 | 4,934 |
| operating | | |
| costs | | |
+--------------+---------+---------+
3 Employee benefit expense
The group had no employees other than its directors during the year. The group's
directors received emoluments of GBP467,000 (2009: GBP229,000) (including
contributions to pension scheme) in respect of their services to the Mutual
Energy group. The directors do not believe that it is practicable to apportion
this amount between their services as directors of the Group and their services
as directors of other Group companies.
4 Finance income and costs
+------------+---------+---------+
| | 2010 | 2009 |
+------------+---------+---------+
| Group | GBP'000 | GBP'000 |
+------------+---------+---------+
| Interest | | |
| expense: | | |
+------------+---------+---------+
| Borrowing | (6,642) | (2,839) |
| (including | | |
| borrowing | | |
| fees) | | |
+------------+---------+---------+
| Finance | (6,642) | (2,839) |
| costs | | |
+------------+---------+---------+
| Interest | | |
| income: | | |
+------------+---------+---------+
| Short-term | 62 | 284 |
| bank | | |
| deposits | | |
+------------+---------+---------+
| Finance | 62 | 284 |
| income | | |
+------------+---------+---------+
| Finance | (6,580) | (2,555) |
| costs - | | |
| net | | |
+------------+---------+---------+
5 Income tax
+------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+------------------------------------------------+----------+----------+
| Group | GBP'000 | GBP'000 |
+------------------------------------------------+----------+----------+
| Current income tax: | | |
+------------------------------------------------+----------+----------+
| Current income tax charge at 28% | 1 | - |
+------------------------------------------------+----------+----------+
| Group relief surrendered | (570) | (82) |
+------------------------------------------------+----------+----------+
| Group relief adjustments in respect of | (158) | - |
| previous periods | | |
+------------------------------------------------+----------+----------+
| Total current income tax | (727) | (82) |
+------------------------------------------------+----------+----------+
| Deferred income tax: | | |
+------------------------------------------------+----------+----------+
| Origination and reversal of temporary | (1,346) | (688) |
| differences | | |
+------------------------------------------------+----------+----------+
| Adjustments in respect of previous periods | 401 | - |
+------------------------------------------------+----------+----------+
| Total deferred income tax | (945) | (688) |
+------------------------------------------------+----------+----------+
| Income tax credit | (1,672) | (770) |
+------------------------------------------------+----------+----------+
Notes to the financial statements for the year ended 31 March 2010
5 Income tax
The income tax credit in the income statement for the year differs from the
standard rate of corporation tax in the UK of 28% (2009: 28%). The differences
are reconciled below:
+-------------+---------+---------+
| | 2010 | 2009 |
+-------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------+---------+---------+
| Loss | (6,841) | (2,748) |
| before | | |
| income | | |
| tax | | |
+-------------+---------+---------+
| Tax | (1,915) | (770) |
| calculated | | |
| at the UK | | |
| standard | | |
| rate of | | |
| corporation | | |
| tax of 28% | | |
| (2009: 28%) | | |
+-------------+---------+---------+
| Effects | | |
| of: | | |
+-------------+---------+---------+
| Adjustments | 243 | - |
| in respect | | |
| of previous | | |
| periods | | |
+-------------+---------+---------+
| Income | (1,672) | (770) |
| tax | | |
| credit | | |
+-------------+---------+---------+
6 Profit attributable to members of the parent company
As permitted by Section 408 the Companies Act 2006, the parent company's profit
and loss account has not been included in these financial statements. The profit
dealt with in the financial statements of the parent company is GBP5,000 (2009:
GBP3,000).
7 Property, plant and equipment
+--------------+----------+
| | |
| | Pipeline |
+--------------+----------+
| Group | GBP'000 |
+--------------+----------+
| Cost | |
+--------------+----------+
| Arising | 38,480 |
| on | |
| acquisition | |
+--------------+----------+
| At 31 | 38,480 |
| March | |
| 2009 | |
| and at | |
| 31 | |
| March | |
| 2010 | |
+--------------+----------+
| | |
+--------------+----------+
| Accumulated | |
| depreciation | |
+--------------+----------+
| Provided | 1,241 |
| during | |
| the year | |
+--------------+----------+
| At 31 | 1,241 |
| March | |
| 2009 | |
+--------------+----------+
| Provided | 1,242 |
| during | |
| the year | |
+--------------+----------+
| At 31 | 2,483 |
| March | |
| 2010 | |
+--------------+----------+
| | |
+--------------+----------+
| Net | |
| book | |
| amount | |
+--------------+----------+
| At 31 | 35,997 |
| March | |
| 2010 | |
+--------------+----------+
| At 31 | 37,239 |
| March | |
| 2009 | |
+--------------+----------+
Depreciation expense of GBP1,242,000 (2009: GBP1,241,000) has been fully charged
to operating costs.
Borrowings are secured on the property, plant and equipment of the group.
Notes to the financial statements for the year ended 31 March 2010
8 Intangible assets
+--------------------------------------+----------+----------+----------+
| | | | Licences |
+--------------------------------------+----------+----------+----------+
| Group | | | GBP'000 |
+--------------------------------------+----------+----------+----------+
| Cost | | | |
+--------------------------------------+----------+----------+----------+
| Arising on acquisition | | | 109,413 |
+--------------------------------------+----------+----------+----------+
| At 31 March 2009 and 31 March 2010 | | | 109,413 |
+--------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------+----------+----------+----------+
| Accumulated amortisation | | | |
+--------------------------------------+----------+----------+----------+
| Provided during the year | | | 2,487 |
+--------------------------------------+----------+----------+----------+
| At 31 March 2009 | | | 2,487 |
+--------------------------------------+----------+----------+----------+
| Provided during the year | | | 2,487 |
+--------------------------------------+----------+----------+----------+
| At 31 March 2010 | | | 4,974 |
+--------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------+----------+----------+----------+
| Net book amount | | | |
+--------------------------------------+----------+----------+----------+
| At 31 March 2010 | | | 104,439 |
+--------------------------------------+----------+----------+----------+
| At 31 March 2009 | | | 106,926 |
+--------------------------------------+----------+----------+----------+
Licences include intangible assets acquired through business combinations.
Licences have been granted for a minimum of 44 years. The Group has concluded
that these assets have a remaining useful economic life of 42 years.
9 Investments
+---------------------------------------------------+----------+-------------+
| | | Subsidiary |
| | | undertaking |
+---------------------------------------------------+----------+-------------+
| Company | | GBP'000 |
+---------------------------------------------------+----------+-------------+
| Cost | | |
+---------------------------------------------------+----------+-------------+
| Arising on acquisition and at 31 March 2009 and | | 112,384 |
| 31 March 2010 | | |
+---------------------------------------------------+----------+-------------+
Investments in subsidiary undertakings are recorded at cost, which is the fair
value of the consideration paid.
The company's subsidiary undertaking, which is incorporated in Northern Ireland,
is:
+---------------------+----------+-------------+--------------------------+
| Name of company | Holding | Proportion | Nature of business |
| | | held | |
+---------------------+----------+-------------+--------------------------+
| | | | Operation of Belfast Gas |
| Belfast Gas | Ordinary | 100% | Transmission pipeline |
| Transmission | shares | | |
| Limited | | | |
+---------------------+----------+-------------+--------------------------+
Notes to the financial statements for the year ended 31 March 2010
10 Trade and other receivables
+-------------+---------+---------+---------+---------+
| | Group | Company |
+-------------+-------------------+-------------------+
| | 2010 | 2009 | 2010 | 2009 |
+-------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------+---------+---------+---------+---------+
| Trade | 134 | 112 | - | - |
| receivables | | | | |
+-------------+---------+---------+---------+---------+
| Other | 657 | 732 | - | - |
| receivables | | | | |
+-------------+---------+---------+---------+---------+
| Amounts | 770 | 106 | 37 | 37 |
| owed by | | | | |
| related | | | | |
| parties | | | | |
+-------------+---------+---------+---------+---------+
| Prepayments | 88 | 121 | 14 | 4 |
| and accrued | | | | |
| income | | | | |
+-------------+---------+---------+---------+---------+
| | 1,649 | 1,071 | 51 | 41 |
+-------------+---------+---------+---------+---------+
None of the group's or company's trade and other receivables are impaired or
past due. The group and company have no history of default in respect of its
trade and other receivables. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivable mentioned
above. The fair value of the group's and company's trade and other receivables
is not materially different to their carrying values.
11 Cash and cash equivalents
+------------+---------+---------+---------+---------+
| | Group | Company |
+------------+-------------------+-------------------+
| | 2010 | 2009 | 2010 | 2009 |
+------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------+---------+---------+---------+---------+
| Cash | 4,318 | 2,891 | 1,307 | 1,314 |
| at | | | | |
| bank | | | | |
| and in | | | | |
| hand | | | | |
+------------+---------+---------+---------+---------+
| Short-term | 2,605 | 3,753 | - | - |
| bank | | | | |
| deposits | | | | |
+------------+---------+---------+---------+---------+
| | 6,923 | 6,644 | 1,307 | 1,314 |
+------------+---------+---------+---------+---------+
Cash and cash equivalents earn interest at a range of Bank of England base rate
less 0.15% to Bank of England base rate plus 2.5%.
12 Called up share capital
+----------+---------+---------+
| | 2010 | 2009 |
+----------+---------+---------+
| Group | GBP'000 | GBP'000 |
| and | | |
| company | | |
+----------+---------+---------+
| Allotted | | |
| and | | |
| fully | | |
| paid | | |
+----------+---------+---------+
| 50,000 | 50 | 50 |
| ordinary | | |
| shares | | |
| of GBP1 | | |
| each | | |
+----------+---------+---------+
Notes to the financial statements for the year ended 31 March 2010
13 Retained earnings
+---------------+---------+
| Group | GBP'000 |
+---------------+---------+
| Total | (1,978) |
| comprehensive | |
| income for | |
| the year | |
+---------------+---------+
| At 31 | (1,978) |
| March | |
| 2009 | |
+---------------+---------+
| Total | (5,169) |
| comprehensive | |
| income for | |
| the year | |
+---------------+---------+
| At 31 | (7,147) |
| March | |
| 2010 | |
+---------------+---------+
+---------------+---------+
| Company | GBP'000 |
+---------------+---------+
| Total | 3 |
| comprehensive | |
| income for | |
| the year | |
+---------------+---------+
| At 31 | 3 |
| March | |
| 2009 | |
+---------------+---------+
| Total | 5 |
| comprehensive | |
| income for | |
| the year | |
+---------------+---------+
| At 31 | 8 |
| March | |
| 2010 | |
+---------------+---------+
14 Borrowings
+-------------+---------+---------+
| | 2010 | 2009 |
+-------------+---------+---------+
| Group | GBP'000 | GBP'000 |
| and | | |
| company | | |
+-------------+---------+---------+
| Non-current | | |
+-------------+---------+---------+
| 2.207% | 111,463 | 108,143 |
| Index | | |
| linked | | |
| guaranteed | | |
| secured | | |
| bond | | |
+-------------+---------+---------+
| Current | | |
+-------------+---------+---------+
| 2.207% | 649 | 555 |
| Index | | |
| linked | | |
| guaranteed | | |
| secured | | |
| bond | | |
+-------------+---------+---------+
| Total | 112,112 | 108,698 |
| borrowings | | |
+-------------+---------+---------+
The 2.207% Index linked guaranteed secured bonds 2048 were issued to finance the
acquisition of Belfast Gas Transmission Limited and are linked to the Retail
Price Index. The bond is secured by fixed and floating charges over all the
assets of the group, and also by way of an unconditional and irrevocable
financial guarantee given by Assured Guaranty (Europe) Limited as to scheduled
payments of principal and interest, including default interest. In return for
this guarantee, every six months the Group pays an index linked fee of 0.18% of
the outstanding balance of the bond. The fair value of the bond is GBP74,228,000
(2009: GBP72,714,000). This fair value has been calculated by discounting the
future cash flows using a discount rate of 4.64% (2009: 4.42%).
Notes to the financial statements for the year ended 31 March 2010
15 Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets and current tax liabilities and
when the deferred income taxes relate to the same fiscal authority.
+----------------------+--------+--------+-----------+----------+
| | | | 2010 | 2009 |
+----------------------+--------+--------+-----------+----------+
| Group | | | GBP'000 | GBP'000 |
+----------------------+--------+--------+-----------+----------+
| Deferred | | | 225 | - |
| income | | | | |
| tax | | | | |
| assets | | | | |
+----------------------+--------+--------+-----------+----------+
| Deferred | | | (35,017) | (35,737) |
| income | | | | |
| tax | | | | |
| liabilities | | | | |
+----------------------+--------+--------+-----------+----------+
| Deferred | | | (34,792)) | (35,737) |
| income | | | | |
| tax | | | | |
| assets/(liabilities) | | | | |
| - net | | | | |
+----------------------+--------+--------+-----------+----------+
The gross movement on the deferred income tax account is as follows:
+-------------+--------+--------+--------+----------+
| | | | | |
+-------------+--------+--------+--------+----------+
| Group | | | | GBP'000 |
+-------------+--------+--------+--------+----------+
| Arising | | | | (36,425) |
| on | | | | |
| acquisition | | | | |
+-------------+--------+--------+--------+----------+
| Income | | | | 688 |
| statement | | | | |
| credit | | | | |
| for the | | | | |
| year | | | | |
+-------------+--------+--------+--------+----------+
| At 31 | | | | (35,737) |
| March | | | | |
| 2009 | | | | |
+-------------+--------+--------+--------+----------+
| Income | | | | 945 |
| statement | | | | |
| credit | | | | |
| for the | | | | |
| year | | | | |
+-------------+--------+--------+--------+----------+
| At 31 | | | | (34,792) |
| March | | | | |
| 2010 | | | | |
+-------------+--------+--------+--------+----------+
The movement in deferred tax assets and liabilities during the period is as
follows:
+-----------------+--------+--------+---------+-------------+------------+---------------+
| | | | | | | |
| | | | | Accelerated | Valuation | |
| | | | Losses | | of | Total |
| | | | | capital | | |
| | | | | | intangible | |
| | | | | allowances | assets | |
+-----------------+--------+--------+---------+-------------+------------+---------------+
| Group | | | GBP'000 | GBP'000 | GBP'000 | |
| | | | | | | GBP'000 |
+-----------------+--------+--------+---------+-------------+------------+---------------+
| Arising | | | - | (5,789) | (30,636) | (36,425) |
| on | | | | | | |
| acquisition | | | | | | |
+-----------------+--------+--------+---------+-------------+------------+---------------+
| Income | | | - | (9) | 697 | 688 |
| statement | | | | | | |
| (charge)/credit | | | | | | |
| for the year | | | | | | |
+-----------------+--------+--------+---------+-------------+------------+---------------+
| At 31 | | | - | (5,798) | (29,939) | (35,737) |
| March | | | | | | |
| 2009 | | | | | | |
+-----------------+--------+--------+---------+-------------+------------+---------------+
| Income | | | 225 | 23 | 697 | 945 |
| statement | | | | | | |
| credit | | | | | | |
| for the | | | | | | |
| year | | | | | | |
+-----------------+--------+--------+---------+-------------+------------+---------------+
| At 31 | | | 225 | (5,775) | (29,242) | (34,792) |
| March | | | | | | |
| 2010 | | | | | | |
+-----------------+--------+--------+---------+-------------+------------+---------------+
The portion of the group's deferred tax liability arising from intangible assets
that is expected to fall due after more than 12 months is GBP28,545,000 (2009:
GBP29,242,000). The portion of the group's deferred tax liability arising from
accelerated capital allowances that is expected to fall due after more than 12
months is estimated at GBP5,775,000 (2009: GBP5,798,000). The portion of the
group's deferred tax asset arising from losses that is expected to fall due
after more than 12 months is GBP225,000 (2009: GBPnil).
Notes to the financial statements for the year ended 31 March 2010
16 Government grant
+-------------+--------+---------+
| Group | | GBP'000 |
+-------------+--------+---------+
| Arising | | 8,926 |
| on | | |
| acquisition | | |
+-------------+--------+---------+
| Amortised | | (288) |
| during | | |
| the year | | |
+-------------+--------+---------+
| At 31 | | 8,638 |
| March | | |
| 2009 | | |
+-------------+--------+---------+
| Amortised | | (288) |
| during | | |
| the year | | |
+-------------+--------+---------+
| At 31 | | 8,350 |
| March | | |
| 2010 | | |
+-------------+--------+---------+
The government grant was provided to the company for the purpose of its
expenditure on its property, plant and equipment. The current portion of the
government grant is GBP288,000 (2009: GBP288,000) and the non-current portion is
GBP8,062,000 (2009: GBP8,350,000).
17 Trade and other payables
+-------------+---------+---------+---------+---------+
| | Group | Company |
+-------------+-------------------+-------------------+
| | 2010 | 2009 | 2010 | 2009 |
+-------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------+---------+---------+---------+---------+
| Trade | 20 | 79 | 8 | 6 |
| payables | | | | |
+-------------+---------+---------+---------+---------+
| Accruals | 399 | 293 | 6 | 3 |
| and | | | | |
| deferred | | | | |
| income | | | | |
+-------------+---------+---------+---------+---------+
| Amounts | - | - | 1,557 | 4,979 |
| owed to | | | | |
| subsidiary | | | | |
| undertaking | | | | |
+-------------+---------+---------+---------+---------+
| Amounts | 66 | 50 | - | - |
| owed to | | | | |
| related | | | | |
| parties | | | | |
+-------------+---------+---------+---------+---------+
| Other | 366 | 313 | 1 | - |
| tax | | | | |
| and | | | | |
| social | | | | |
| security | | | | |
+-------------+---------+---------+---------+---------+
| | 851 | 735 | 1,572 | 4,988 |
+-------------+---------+---------+---------+---------+
18 Commitments
Operating lease commitments - group as lessee
The group has entered into a commercial lease on land which expires on 31
December 2051. There are no restrictions placed upon the lessee by entering into
these leases.
The future aggregate minimum lease payments under non-cancellable operating
leases are as follows:
+--------+---------+---------+
| | 2010 | 2009 |
+--------+---------+---------+
| Group | GBP'000 | GBP'000 |
+--------+---------+---------+
| Not | 12 | 12 |
| later | | |
| than | | |
| one | | |
| year | | |
+--------+---------+---------+
| After | 47 | 47 |
| one | | |
| year | | |
| but | | |
| not | | |
| more | | |
| than | | |
| five | | |
| years | | |
+--------+---------+---------+
| After | 429 | 441 |
| five | | |
| years | | |
+--------+---------+---------+
| | 488 | 500 |
+--------+---------+---------+
Notes to the financial statements for the year ended 31 March 2010
19 Related party transactions
The ultimate controlling parties of the group are the members of Mutual Energy
Limited.
During the year the group entered into transactions, in the ordinary course of
business, with related parties.
Transactions entered into, and balances outstanding at 31 March with related
parties, are as follows:
+--------------+--------+--------+--------+---------+---------+
| | | Amount owed |
| | | (to)/from |
| | | related party |
+-----------------------+-----------------+-------------------+
| | | | | 2010 | 2009 |
+--------------+--------+--------+--------+---------+---------+
| Group | | | | GBP'000 | GBP'000 |
+--------------+--------+--------+--------+---------+---------+
| Fellow | | | | 770 | 58 |
| subsidiary | | | | | |
| undertakings | | | | | |
+--------------+--------+--------+--------+---------+---------+
| Parent | | | | (45) | 48 |
| undertakings | | | | | |
+--------------+--------+--------+--------+---------+---------+
| Fellow | | | | (21) | (50) |
| subsidiary | | | | | |
| undertakings | | | | | |
+--------------+--------+--------+--------+---------+---------+
+--------------+-------------+---------+---------+
| | |
| | Amount of |
| | transaction |
+----------------------------+-------------------+
| | | 2010 | 2009 |
+--------------+-------------+---------+---------+
| Group | Nature | GBP'000 | GBP'000 |
| | of | | |
| | transaction | | |
+--------------+-------------+---------+---------+
| Parent | Charges | 190 | 171 |
| undertakings | payable | | |
+--------------+-------------+---------+---------+
| Parent | Group | - | 36 |
| undertakings | relief | | |
| | surrendered | | |
+--------------+-------------+---------+---------+
| Fellow | Group | 728 | 46 |
| subsidiary | relief | | |
| undertakings | surrendered | | |
+--------------+-------------+---------+---------+
| Fellow | Charges | 31 | 24 |
| subsidiary | payable | | |
| undertakings | | | |
+--------------+-------------+---------+---------+
+--------------+--------+--------+--------+---------+---------+
| | | Amount owed |
| | | (to)/from |
| | | related party |
+-----------------------+-----------------+-------------------+
| | | | | 2010 | 2009 |
+--------------+--------+--------+--------+---------+---------+
| Company | | | | GBP'000 | GBP'000 |
+--------------+--------+--------+--------+---------+---------+
| Subsidiary | | | | (1,557) | (4,979) |
| undertaking | | | | | |
+--------------+--------+--------+--------+---------+---------+
| Fellow | | | | 37 | 37 |
| subsidiary | | | | | |
| undertakings | | | | | |
+--------------+--------+--------+--------+---------+---------+
+--------------+-------------+---------+---------+
| | |
| | Amount of |
| | transaction |
+----------------------------+-------------------+
| | | 2010 | 2009 |
+--------------+-------------+---------+---------+
| Company | Nature | GBP'000 | GBP'000 |
| | of | | |
| | transaction | | |
+--------------+-------------+---------+---------+
| Fellow | Group | - | (1) |
| subsidiary | relief | | |
| undertakings | claimed | | |
+--------------+-------------+---------+---------+
| Subsidiary | Interest | 6,817 | 2,752 |
| undertaking | receivable | | |
+--------------+-------------+---------+---------+
| Subsidiary | Interest | 162 | 53 |
| undertaking | payable | | |
+--------------+-------------+---------+---------+
Notes to the financial statements for the year ended 31 March 2010
20 Financial instruments
The group's and company's financial instruments are classified as follows:
+------------------------------------+-------------------------------------+
| Assets and liabilities | Category of financial instrument |
+------------------------------------+-------------------------------------+
| Trade and other receivables | Loans and other receivables |
+------------------------------------+-------------------------------------+
| Cash and cash equivalents | Loans and other receivables |
+------------------------------------+-------------------------------------+
| Borrowings | Other financial liabilities at |
| | amortised cost |
+------------------------------------+-------------------------------------+
| Trade and other payables | Other financial liabilities at |
| | amortised cost |
+------------------------------------+-------------------------------------+
The group's and company's contractual undiscounted cash flows (including
principal and interest payments) of its financial liabilities are as follows:
+----------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | |
| | | | | | | More | |
| As at | Within | 1-2 | 2-3 | 3-4 | 4-5 | | |
| 31 | | | | | | than 5 | Total |
| March | 1 year | years | years | years | years | | |
| 2010 | | | | | | years | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Group | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------+---------+---------+---------+---------+---------+---------+---------+
| 2.207% | 3,119 | 3,182 | 3,246 | 3,311 | 3,376 | 158,831 | 175,065 |
| bond | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Trade | 485 | - | - | - | - | - | 485 |
| and | | | | | | | |
| other | | | | | | | |
| payables | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| | 3,604 | 3,182 | 3,246 | 3,311 | 3,376 | 158,831 | 175,550 |
+----------+---------+---------+---------+---------+---------+---------+---------+
+----------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | |
| | | | | | | More | |
| As at | Within | 1-2 | 2-3 | 3-4 | 4-5 | | |
| 31 | | | | | | than 5 | Total |
| March | 1 year | years | years | years | years | | |
| 2009 | | | | | | years | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Group | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------+---------+---------+---------+---------+---------+---------+---------+
| 2.207% | 2,951 | 3,009 | 3,069 | 3,131 | 3,194 | 156,473 | 171,827 |
| bond | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Trade | 422 | - | - | - | - | - | 422 |
| and | | | | | | | |
| other | | | | | | | |
| payables | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| | 3,373 | 3,009 | 3,069 | 3,131 | 3,194 | 156,473 | 172,249 |
+----------+---------+---------+---------+---------+---------+---------+---------+
+----------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | |
| | | | | | | More | |
| As at | Within | 1-2 | 2-3 | 3-4 | 4-5 | | |
| 31 | | | | | | than 5 | Total |
| March | 1 year | years | years | years | years | | |
| 2010 | | | | | | years | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Company | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------+---------+---------+---------+---------+---------+---------+---------+
| 2.207% | 3,119 | 3,182 | 3,246 | 3,311 | 3,376 | 158,831 | 175,065 |
| bond | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Trade | 1,571 | - | - | - | - | - | 1,571 |
| and | | | | | | | |
| other | | | | | | | |
| payables | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| | 4,690 | 3,182 | 3,246 | 3,311 | 3,376 | 158,831 | 176,636 |
+----------+---------+---------+---------+---------+---------+---------+---------+
+----------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | |
| | | | | | | More | |
| As at | Within | 1-2 | 2-3 | 3-4 | 4-5 | | |
| 31 | | | | | | than 5 | Total |
| March | 1 year | years | years | years | years | | |
| 2009 | | | | | | years | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Company | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------+---------+---------+---------+---------+---------+---------+---------+
| 2.207% | 2,951 | 3,009 | 3,069 | 3,131 | 3,194 | 156,473 | 171,827 |
| bond | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| Trade | 4,988 | - | - | - | - | - | 4,988 |
| and | | | | | | | |
| other | | | | | | | |
| payables | | | | | | | |
+----------+---------+---------+---------+---------+---------+---------+---------+
| | 7,939 | 3,009 | 3,069 | 3,131 | 3,194 | 156,473 | 176,815 |
+----------+---------+---------+---------+---------+---------+---------+---------+
Notes to the financial statements for the year ended 31 March 2010
21 Ultimate parent undertaking
The immediate parent undertaking is Belfast Gas Transmission Holdings Limited, a
company incorporated in Northern Ireland. Group financial statements for this
company are not prepared.
The ultimate parent undertaking, and the only group of undertakings for which
group financial statements are prepared, is Mutual Energy Limited, a company
incorporated in Northern Ireland. Copies of the group financial statements are
available to the public from First Floor, The Arena Building, 85 Ormeau Road,
Belfast, BT7 1SH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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