ETSA Utilities Pty Ltd (ETSA Utilities) was incorporated under the Corporations Law in May 1998 as a subsidiary of ETSA Capital Pty Ltd. In July 1999 the shares in ETSA Utilities were transferred, as a result of a Ministerial Transfer Order issued pursuant to the Electricity Corporations Act 1994, to ETSA Capital (No.2) Pty Ltd, a subsidiary of the Treasurer.
On 3 February 2000 the name of ETSA Utilities was changed to RESI Utilities Pty Ltd (RESI Utilities).
The primary function of ETSA Utilities was to operate and manage the electricity distribution network in South Australia.
On 12 December 1999, the South Australian Treasurer signed an agreement with Cheung Kong Infrastructure Holdings (CKI) and Hong Kong Electric International Limited (HEI) for the disposal of the assets and liabilities of ETSA Utilities. Although settlement of that transaction did not take place until 28 January 2000, the benefits and risks associated with the business were transferred as at the date of the agreement, ie 12 December 1999.
To give effect to this agreement:
assets with a book value of $2.1 billion, including prescribed electricity distribution assets as defined by the Electricity Corporations (Restructuring and Disposal) Act 1999, were transferred to the public corporation entitled Distribution Lessor Corporation. The prescribed electricity distribution assets were subsequently leased to CKI and HEI;
non-prescribed assets (net of liabilities) were sold to CKI and HEI.
Further commentary on these transactions is included below under the heading Interpretation and Analysis of Financial Statements.
Total proceeds received from the disposal of non-prescribed assets was $184.4 million.
Accounting profit on disposal of ETSA Utilities’ non-prescribed assets was $36.3 million.
Dividends paid for the year were $131.8 million.
In accordance with section 31 of the Public Finance and Audit Act 1987 and subclause 13(3) of the Schedule to the Public Corporations Act 1993 the Auditor-General may at any time, and must in respect of each financial year, audit the accounts and financial statements of RESI Utilities Pty Ltd (formerly ETSA Utilities Pty Ltd).
The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal control. This was particularly the case for the early part of the financial year when ETSA Utilities operated the electricity distribution business.
During 1999-2000 a specific area of audit attention was the accounting for the restructure and disposal of the assets and liabilities of ETSA Utilities.
Following the completion of the interim audit, an audit management letter was forwarded to the Chief Executive Officer of ETSA Utilities, with copies provided to the:
Chairman of the ETSA Utilities Board Audit Committee;
Manager, Internal Audit, ETSA Utilities.
A satisfactory response was received for all matters raised.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the RESI Utilities Pty Ltd (formerly ETSA Utilities Pty Ltd) included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.
Audit formed the opinion that the controls exercised by the RESI Utilities Pty Ltd (formerly ETSA Utilities Pty Ltd) in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with the law.
During the year Ministerial Transfer Orders were made by the Treasurer pursuant to the Electricity Corporations (Restructuring and Disposal) Act 1999. These Orders transferred the following assets, at their book value, from ETSA Utilities to Distribution Lessor Corporation.
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2000 |
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$’000 |
Prescribed electricity distribution network assets |
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2 069 581 |
Prescribed network land |
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26 493 |
Non-prescribed land and buildings (Angle Park) |
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6 330 |
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|
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2 102 404 |
Further commentary on the subsequent lease of the prescribed assets to CKI and HEI is included later in this Report under the heading Distribution Lessor Corporation.
During the year assets (net of liabilities) of ETSA Utilities were sold to CKI and HEI. The assets (net of liabilities) sold reflected their values as at 12 December 1999, and were as follows:
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2000 |
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Assets: |
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|
$’000 |
$’000 |
Receivables |
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|
107 120 |
|
Inventories |
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7 640 |
|
Property, plant and equipment |
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|
132 339 |
|
Other |
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43 419 |
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|
|
|
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290 518 |
Liabilities: |
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|
|
|
Creditors and accruals |
|
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29 928 |
|
Provisions |
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111 229 |
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Other |
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1 233 |
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|
|
|
|
142 390 |
Net assets |
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|
|
148 128 |
Proceeds from disposal |
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|
|
184 404 |
Profit on Disposal of Non-Prescribed Distribution Assets |
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|
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36 276 |
The result of operations for the year ended 30 June 2000 for RESI Utilities (formerly ETSA Utilities) is set out below. The result reflects both the period during which ETSA Utilities operated the electricity distribution network, together with the impact of the transfer or sale of assets and liabilities.
Profit and Loss Statement for the year ended 30 June 2000
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2000 |
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$’000 |
REVENUES |
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|
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257 506 |
EXPENSES |
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|
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157 136 |
EARNINGS BEFORE INTEREST AND TAX |
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|
|
100 370 |
Net financing charges |
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|
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50 670 |
OPERATING PROFIT BEFORE ABNORMAL ITEMS AND INCOME TAX |
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|
|
49 700 |
Abnormal items |
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|
|
45 |
OPERATING PROFIT BEFORE INCOME TAX |
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49 745 |
Income tax |
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|
|
(10 188) |
OPERATING PROFIT AFTER INCOME TAX |
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|
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59 933 |
Extraordinary items |
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|
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36 276 |
OPERATING PROFIT AND EXTRAORDINARY ITEMS AFTER INCOME TAX |
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96 209 |
Retained profits at 1 July |
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15 537 |
Transfer from reserves |
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20 006 |
TOTAL AVAILABLE FOR APPROPRIATION |
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131 752 |
Dividends paid or provided for |
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|
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131 752 |
RETAINED PROFITS AT 30 JUNE |
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- |
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|
The Company did not have any assets or liabilities as at 30 June 2000.