annual report 2012 - welcome to efl...

FIJI

ELE

CTRICITY AUTHORITY

2012ANNUAL REPORT

CONTENTS

Letter to the Minister 1

Key Outcomes for 2012 3

Members of the Authority 4

Executive Management Team 5

Corporate Governance 7

Chairman’s Report 10

Chief Executive Officer’s Report 16

Review for the Year 18

Financial Statements 33

Statistics 63

CONSTITUTION & FUNCTIONS

The Fiji Electricity Authority was established, incorporated and constituted under the provisions of the Electricity Act of 1966 and began operating from the 1st August of that year.

The Board Members of the Authority are appointed by the Government. The Chief Executive Officer is an ex-officio Member of the Board and is responsible to the Members for the Authority’s management and for the execution of its policies. The powers, functions and duties of the Authority under the Electricity Act are for the basic purpose of providing and maintaining a power supply that is financially viable, economically sound and consistent with the required standards of safety, security and quality.

A uniform tariff rate is charged for electricity used by each consumer group. The tariffs are fixed according to government policy and are designed to meet specified targets while achieving a reasonable rate of return for the Shareholder.

The Authority is entrusted with enforcing the Electricity Act and regulations, setting standards, examining and registering electricians, and is empowered to approve and license suppliers to serve certain areas.

The Authority is also governed by the requirements under the Public Enterprises Act.

Vision‘Energising our Nation.’

Mission‘We aim to provide clean and affordable energy solutions to Fiji with at least 90% of the energy requirements through renewable sources by 2015.’

ValuesCustomer focus

Honesty

Courage to do what is right for FEA

Team work

Individual accountability

Transparency

Innovativeness

COVER IMAGES

The front cover page portrays the Weir which is part of the Nadarivatu Hydro Project. This project was officially opened by the Prime Minister in September 2012.

The back cover page portrays the turbines in the power station which is part of the Nadarivatu Hydro Project. These turbines generate electricity utilising the water from the Weir and this water is transported at high speed to the power station via a 2.2km underground tunnel and a 2km penstock.

PB

Fiji Electricity Authority | Annual Report 2012

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Annual Report 2012 | Fij i Electricity Authority

29th May 2013

The Honourable Minister for Works,Transport & Public Utilities Level 4, Nasilivata House Ratu Mara Road, Samabula, Suva

Dear Minister,

Annual Report 2012

I am pleased to present the Fiji Electricity Authority’s Annual Report for 2012. The report provides a detailed summary of FEA’s performance in accordance with Section 25 of the Electricity Act Cap 180.

2012 has been a challenging year for the Authority as it was put to test as a result of the two floods early in the year and Cyclone Evan in December. Despite these unplanned natural events occurring in 2012, FEA still rose above these challenges and performed admirably by recording a financial profit of $75.3M after tax in 2012.

Construction of the US$150M Nadarivatu Renewable Hydro Power Project was completed in May 2012 and the Scheme was officially opened on the 14th September 2012 which is another milestone achievement for FEA. This project is a major step towards achieving the Authority’s renewable energy target of generating 90% of its energy requirements through renewable sources by 2015.

The Authority continued to meet all its obligations and fulfil all its responsibilities whilst also continuing with the efficient operation of the power system.

On behalf of the Members of the Authority, I take this opportunity to thank the Government for its continued support and look forward to the same in 2013 and beyond.

Sincerely,

Nizam-ud-Dean Chairman

Letter to the Minister

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Fiji Electricity Authority | Annual Report 2012 Annual Report 2012 | Fij i Electricity Authority

The Honourable Prime Minister, Commodore Josaia Voreqe Bainimarama, at the opening of the Nadarivatu Hydro Project on 14th September 2012. This project, which is the second largest hydro scheme in Fiji, is a major step towards achieving the Authority’s renewable energy target of generating 90% of its energy requirements through renewable sources by 2015.

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Annual Report 2012 | Fij i Electricity Authority Annual Report 2012 | Fij i Electricity Authority

Key Outcomes for the year

FEA achieved a positive financial result in 2012 recording a profit of $75.3M after tax. This includes an income tax benefit of $13.5M as a result of incorporating the 40% fuel investment allowance granted for the Nadarivatu Hydro Project (NHP).

The shareholder value of FEA increased from $472M as at the end of 2011 to $552M at the end of 2012.

The positive financial result enabled FEA to carry out Capex work totalling $55.9M in 2012, repay matured bonds and loans aggregating to F$41.3M in 2012, paid out around $10M in 100% refundable capital contribution and to commence with the Monasavu Hydro Project half-life repairs & maintenance work spending close to F$13M in 2012.

FEA achieved all the Financial Covenants signed with lenders; China Development Bank (CDB), ANZ and BSP banks. This ensured that Government, being the sovereign Guarantor of the FEA Loans, was not exposed.

FEA successfully rolled over 2X$20M ANZ loans and refinanced 1x$20M BSP loan at lower interest rates resulting in interest savings to FEA.

For the first time FEA’s total asset value exceeded F$1B. FEA has added significant shareholder value in recent years.

FEA’s gearing ratio at the end of December 2012 was 34.3% (2011-41.3%) which is within the international benchmark for power utilities of not more than 45%. As a result, FEA will be able to borrow in future to partially fund its capital expenditure programme.

FEA tendered the refinancing of US$30M of the China Development Bank (CDB) loan in the local financial market to take advantage of the prevailing high liquidity and low interest rates and also to eliminate any foreign currency exposures. This loan will be finalised in early 2013.

Nadarivatu Hydro Project was officially opened on the 14th September 2012 and generated a total of 29.89 GWh of energy in 2012. The final project cost is US$140.7M compared to a budget of US$150M.This is a big achievement for a project of this magnitude.

The Validation Process of the Nadarivatu Hydro Project Clean Development Mechanism (CDM) has been completed by the Japan Consulting Institute (JCI) who is the Designated Operational Entity (DOE). The Validation Report has been uploaded and the project will be submitted for registration with the United Nations Framework Convention on Climate Change (UNFCCC) in January 2013.

In request of the NHP, approval was obtained from the Minister of Finance for the 40% Depreciation Allowance applicable to Fuel Economy and Alternative Source of Energy Projects. This has positively assisted FEA’s tax position in 2012.

FEA purchased the Head Office Complex from the iTaukei Trust Fund.

Acquired suitable land at the Kalabo Tax Free Zone to establish a zone substation in Nasinu to cater for future increase in electricity demand.

Phase-1 of the half-life repair & maintenance of the Monasavu Hydro Scheme progressed according to work plan. Phase-2 will commence in 2013. The total cost of this repair and maintenance is $44M spread over a period of four years. Repair and maintenance once completed will improve the performance, reliability and duration of this hydro scheme.

Completed the conversion of the 2x6 MW Industrial Diesel Oil (IDO) generating sets at a cost of $10M to run on cheaper Heavy Fuel Oil (HFO) at the Vuda Power Station. The HFO plant was commissioned in May 2012. FEA achieved fuel savings of F$3.99M in 2012 from this conversion.

Acquired funding of FJ$20M from ANZ Bank to partially fund the Wainisavulevu Weir Raising Project. This project progressed according to schedule in 2012.

FEA spent $6.97M on rural, commercial/industrial and system reinforcement projects. A further $4.3M was spent on replacement of aging assets at Labasa Power Station and various Zone Sub-stations.

Awarded contracts for the augmentation of the 33kV Zone Substations at Vuda and Waqadra at a cost of F$2.1M. A further contract was awarded for the construction of a new double circuit 33kV transmission line from Vuda to Waqadra. This project will be completed in 2014.

Awarded a tender for the upgrade of the SCADA system at a cost of F$1.97M. This will improve the daily operation of the entire power system from the Authority’s National Control Centre in Vuda.

Commenced feasibility studies to determine the viability of developing Hydro Projects in the upper Navua River area, Wailoa Downstream and at Waibutasavu.

Construction of a 33kV transmission line from Cawaira power station in Labasa to Dreketi and establishment of zone substations at Seaqaqa, Dreketi and Cawaira progressed according to the work plan for 2012. This project is expected to be commissioned by the end of 2013.

Achieved a System Average Interruption Duration Index (SAIDI) for unplanned power outages of 666 minutes against a target of 750 minutes.

Achieved a record high ICT up-time system performance of 99.905% against a target of 99.8%.

Completed a comprehensive review of the Organisation’s Top Business Risks and implemented formulated strategies to mitigate the risks. This has resulted in the improvement of the risk level of 13 top business risks by at least one level.

Paid out a total of $4.2M in retirement benefits and long service leave to employees and thereafter removed these benefits effective from the 7th November 2011 in line with the Essential National Industries Decree (ENID).

Awarded the President’s Award in the 2012 Fiji Business Excellence Awards. This is a milestone achievement for the organisation.

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Akosita DrovaMember (Appointed

June 2012)

Members of the Authority

Nizam-ud-DeanChairman

Aseri RadrodroMember (Appointed

March 2012)

Gardiner WhitesideDeputy Chairman

Francis Bulewa KeanMember

Isikeli VoceduaduaMember (Resigned

May 2012)

Hasmukh PatelChief Executive Officer

Ex-Officio Member


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Naveen LakshmaiyaGeneral Manager Human Resources

Om Dutt SharmaGeneral Manager

Network

Fatiaki GibsonProject Director -

Nadarivatu

Anand NanjangudChief Information

Officer

Executive Management Team

Hasmukh PatelChief Executive Officer

Arieta TawakeActing General

Manager Customer Services

Saumen BandyopadhyayGeneral Manager System

Planning & Control

Tuvitu DelairewaGeneral Manager

Commercial

Bobby NaimawiChief Financial Officer/

Board Secretary

Eparama TawakeGeneral Manager

Generation


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Captain (N) Timoci Lesi Natuva, the Honourable Minister for Works, Transport and Public Utilities at the opening of the Rural Electrification Scheme at Navaga, Ba. The Government funded this project as part of its plan to make electricity available to the rural communities in Fiji.

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Overview

The Fiji Electricity Authority is committed in upholding the principles of good corporate governance to ensure the Authority is directed and controlled in a responsible, professional and transparent manner with the purpose of safe-guarding its day to day operations.

The FEA promotes accountability, transparency, honesty and integrity. The pillars of corporate governance are observed at all levels throughout its business. The adoption of sound policies and procedures assures all stakeholders that the business is built on a firm foundation.

FEA has implemented a number of measures to achieve its corporate governance objectives. The internal audit and control systems provide safeguards against risks and protect the FEA’s assets as well as ensures that its policies and management practices are implemented as planned. Further, FEA’s Customer Services are monitored by Quality Assurance personnel. We have also established a variety of communication channels with the media and through presentations we ensure that our affairs are transparent to the shareholder, customers and other stakeholders.

The Board members and staff alike follow a set of policies and procedures to ensure that FEA meets the relevant statutory and regulatory requirements.

Boardroom Framework

The Authority’s Board comprises of 6 members, of which 3 are from the private sector. The public sector is represented by the Permanent Secretary for Works, Transport and Public Utilities and the Permanent Secretary of Finance. The CEO is the ex-officio member of the Board. Daily management of FEA’s business is the responsibility of the CEO, however, the Audit & Finance sub-committee, Human Resources sub-committee and the Major Projects sub-committee oversee and provide guidance to the management.

Board of Directors

The Board is charged with the responsibility for achieving the Corporate goals and objectives of FEA by directing and supervising its affairs in a responsible and effective manner. The primary responsibility of the Board is to oversee the following key areas:

• FormulationofFEA’sobjectives,strategies,policies,businessplansandcorporatevalues

• Monitoringmanagementperformance

• Majorfinancingarrangements

• Materialacquisitionsanddisposals

• EnsuringintegrityofFEA’saccountingandfinancialreporting

• Overseetheinternalcontrolandriskmanagement

• Overseethemanagementofrelationshipswithstakeholders,includingShareholders,Customers,Government,Suppliersand Employees.

Members of the Authority as at the date of this Annual Report are:

Director Status


Gardiner Whiteside Deputy Chairman

Francis Kean Member - Permanent Secretary for Works, Transport & Public Utilities

Akosita Drova/Isikeli Voceduadua Member - Representative from the Ministry of Finance

Aseri Radrodro Member – Appointed in March 2012

Hasmukh Patel Ex-Officio Member - Chief Executive Officer

The Board Members bring a diversity of business and professional experience to the Board. All Members have a service term of directorship of two years and could be extended thereafter. All major issues and other company matters are subject to open and thorough discussions at the Board meetings to ensure that the interest of all stakeholders are fully and impartially taken into account.

The executive management team of FEA provides accurate, adequate and detailed financial and operational information to the Members of Board to keep them up to date with the latest developments and perfomance of the Authority and enable them to make informed decisions and discharge their responsibilities appropriately.

Corporate GovernanCe

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The FEA has a written Code of Conduct for the Members and Employees to strictly adhere to. The Code provides guidelines on the personal conduct of Members and Employees. Further, the Board Members are also required to sign a disclosure and confidentially agreement on an annual basis. The Members are also required to declare their conflicts of interest if any at the Board meetings. The Code of Conduct and the Disclosure and Confidentially Agreements are reviewed from time to time to take into consideration changes in legislation and the business environment.

The Board meetings are normally held each month to discuss and decide on major corporate, strategic and operational issues. The draft minutes of all Board meetings are taken by the Company Secretary and circulated to all Members for their comments within a reasonable time after the meeting.

In 2012, Board meetings were held 12 times and the attendance of each Member was as follows:

Director Number of Meetings Attended

Status

Nizam-ud-Dean 12 Chairman

Gardiner Whiteside 10 Deputy Chairman

Francis Kean 12 Member - Permanent Secretary for Works, Transport & Public Utilities

Akosita Drova/Isikeli Voceduadua 12 Member - Representative from the Ministry of Finance

Aseri Radrodro 10 Member – Appointed in March 2012

Hasmukh Patel 12 Ex-Officio Member - Chief Executive Officer

Delegation by the Members of the Board

The day to day management of FEA’s business is delegated to the Executive Management Team under the guidance of the relevant Board sub-committees.

The following sub-committees of the Board assisted the Board in advisory functions in 2012:

Major Projects Sub-Committee

The key role of this sub-committee is to assist the Board in fulfilling its responsibilities by overseeing the delivery of all major infrastructure projects being undertaken by the Authority in a timely, efficient and cost effective manner including making decisions in relation to the project as and when required. In 2012, the committee monitored the development of the Nadarivatu Hydro Power Project, other major CAPEX Projects and considered feasibility studies of other potential hydro schemes. The sub-committee met 11 times during the year.

Audit & Finance Sub-Committee

The key role of the sub-committee is to oversee the financial and the Internal Audit functions, thus providing assurance on the effectiveness of the Authority’s internal control processes and oversee, as well as discuss, risk management practices. In 2012, the Committee discussed FEA’s financial position on a monthly basis, approved the company’s Corporate Plan and the company’s internal audit plan and evaluated the effectiveness of the Authority’s internal control practices. The sub-committee met 11 times during the year.

HR Sub-Committee

The sub-committee is responsible for overseeing the compliance of corporate governance in relation to Human Resource matters. It provides advice to the Board regarding the development, implementation and effectiveness of Human Resource Policies and Strategies and Occupational Health & Safety Management. In 2012, the Committee approved the HR Development Plan for all employees and assured successful implementation of the Essential National Decree. The HR committee further reviewed the health and safety practices in FEA to ensure that effective health and safety culture was established. The sub-committee met 11 times during the year.

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Cabinet Ministers and the Chinese Ambassador to Fiji attending the official opening of the Nadarivatu Hydro Project on 14th September 2012 by the Honourable Prime Minister.

This picture portrays the inlet portal of the tunnel that delivers the water from the Weir to the Power Station.

The Honourable Prime Minister and FEA officials touring the Weir site at the Nadarivatu Hydro Project.

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2012 was a milestone year for FEA.

Firstly, it commissioned its second largest hydro scheme in Viti Levu, the 40MW Nadarivatu Hydro Scheme. This is a giant step towards fulfilling its long term objective of producing 90% of its energy through renewable sources by 2015.

Secondly, the commissioning of the Nadarivatu Hydro Scheme reaffirms FEA’s commitment towards implementing its optimum Power Development Plan.

Finally, the year ended on a high note with FEA creating history by winning the President’s Award for the first time at the 14th Fiji Business Excellence Awards. This shows that FEA has moved beyond quality and is inspired by excellence and best-in-class perfomance.

Chairman’s Report

2012 Profitability

FEA made a financial profit of $75.3 M after tax in 2012.This equates to a Return on Shareholder Funds (ROSF) of positive 13.6%.The profit recorded for 2012 was largely due to the excellent performance of the Monasavu Hydro Scheme, commissioning of the Nadarivatu Hydro Project in 2012 and stringent measures implemented to control operational expenditure. The profit after tax includes an income tax benefit of $13.5M as a result of the 40% fuel investment allowance granted by the Ministry of Finance for the Nadarivatu Hydro Scheme. Had this allowance not been approved, FEA would have recorded an income tax expense of $12.4M in 2012 and this would have resulted in a profit after tax of $49.4M.

The profitability of FEA for the period 2005 to 2012 is illustrated in the graph shown below:

FEA recorded a fuel cost of $105.1M in 2012 as compared to $137.8M for 2011. This is equivalent to 35% of the total revenue for 2012. Had the tariff increases in 2010 and 2011 not been implemented then substantial losses could have resulted in 2012.

FEA incurs significant non-commercial obligation (NCO) costs each year when supplying subsidised electricity to rural Viti Levu and to the whole of Vanua Levu and Ovalau. It is estimated that FEA incurred around $25M of NCO costs when fulfilling its social obligations in 2012. Although the Public Enterprises Act requires the Government to reimburse the NCO costs to FEA, such costs are not refunded. Instead, the Government has accepted, via Cabinet decision CP2002 18th Meeting dated 10th September 2002

Operating Profit/(Loss)

F$(M

illio

n)

After Tax Before Tax

2005-21-18-15-12-9-6-30369

12

211815

242730333639424548515457

69

60

72

63

75

66

78

2006 2007 2008 2009 2010 2011 2012

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that FEA’s non-commercial contribution to social and community services through its electricity subsidies to be recognised as its annual dividend to the Government. Therefore, the deemed dividend paid to the Government by FEA for 2012 is a notional adjustment to account for the NCO costs which would have resulted in an after-tax financial profit of $95.3M and a ROSF of positive 17.3% for the year. The adjusted profitability numbers and ROSF are shown below for the period 2005 to 2012.

FEA appreciates the support provided by the Government through granting of duty concessions for its Renewable Energy Projects and guaranteeing FEA’s borrowings. It is essential that the Government continues to support FEA to ensure the long term financial sustainability of the organisation and achievement of its Power Development Plan.

Financial Strength

FEA’s gearing ratio, as measured by Debt to Debt plus Capital and Reserves excluding cash-in-hand, was 34.3% as at 31st December 2012, which is well within the international benchmark for power utilities of about 45%, despite incurring Capital Expenditure of around $55.9M in 2012. The gearing has reduced substantially compared to 2011 of 41.3%. This provides opportunities for additional borrowing by FEA to fund its Power Development Plan. The reduction in gearing level is due to the good profit recorded in 2012 and FEA repaying matured bonds & loans of around $41.3M in 2012.

The shareholder value of FEA was $552M at the end of 2012 which increased from $472M at the end of 2011 and $324.9M at the end of 2002. For the first time FEA’s total assets are worth $1.03B, a substantial increase from $983M in 2011 and $456.7M in 2002. This shows that it has added significant shareholder value over the last 10 years since the implementation of organisational reforms.

FEA Restructure

The restructure process for the Initial Public Offering (IPO) of the Fiji Electricity Authority with the intention to partially privatize the Company continued in 2012. The Ministry of Public Enterprises and FEA had called for tenders for the appointments of the Independent Accountant and the Investment Advisor.This tender was called in late 2012 and will close in early 2013. It is envisaged that the appointment of the Independent Accountant and Investment Advisor will be finalised in early 2013.

Return on Shareholders Funds to Account for NCO

Perc

ent (

%)

Before adjusting for NCO After adjusting for NCO

20122011201020092008200720062005

-5.0

0

5.0

10.0

15.0

20.0

After Tax Operating Profit/(Loss) to Account for NCO

F$ (M

illio

n)

Before adjusting for NCO After adjusting for NCO

20122011201020092008200720062005-20

0

20

40

60

80

100

The FEA Head Office in Suva.

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Butoni Wind Farm

Butoni wind farm generated 6.81M units of electricity in 2012. This is equivalent to a fuel cost saving of around $3M in 2012. Depicted below graphically is the energy output from Butoni Wind Farm since commissioning:

Statistics for the wind farm from the commencement of its operations in June 2007 are given below:

•TotalGenerationOutput=33.4Munitsofelectricity

•TotalDieselFuelCostSavings=F$11.98M

•TotalForeignExchangeSavings=F$7.67M

•TotalDieselFuelSaved=7021tonnesofdiesel

•TotalEmissionReduction=21,816tonnesofCarbonDioxide

Cyclone Evan in late December damaged the blades of some of the wind turbines even though the wind turbines had been lowered to the ground.

Progress on Renewable Energy Projects

The 40MW Nadarivatu Renewable Hydro Power Project was commissioned in May 2012 and the official opening was carried out by the Honourable Prime Minister on the 14th September 2012. By year end this new hydro station had produced some 29.9M units of electricity.

This project will greatly assist FEA in moving towards achieving its renewable energy target of 90% from renewable energy sources by 2015.

The Validation Process for carbon credits for the project under the Clean Development Mechanism (CDM) was completed and will be submitted for registration with the UNFCCC in early January 2013.

Full feasibility studies have been carried out on potential Hydro Projects in Viti Levu to establish their viability. FEA will be calling for “Expressions of Interest” (EOI) for the development of some of these schemes early next year.

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0

Butoni Generation (KWh)

kilo

wat

t-ho

urs

20082007 2009 2010 2011 2012

Construction of the Wainisavulevu Weir Raising Project is in progress and when completed will provide an additional 10M units of electricity per annum. The project is estimated to cost around $30M and will be completed by early 2015.

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Productivity Improvements

FEA has achieved significant productivity improvements since 2000. The number of employees has been reduced by 27%, from 960 in 2000 to 703 in 2012, at a time when:

• Number of customers increased by 36%, from117,315 in 2000 to 159,018 in 2012

• Generation output increased by 57%, from 523gigawatt-hours in 2000 to 823GWh in 2012;

• Length of power lines and underground cablesincreased by 30%, from 7,124 km in 2000 to 9,240 km in 2012;

• Totalassetsincreasedby118%,from$473Min2000to $1,031M in 2012;

• Total shareholder funds increased by 75%, from$316M in 2000 to $552M in 2012.

As a result, the following productivity improvements have been achieved between 2000 and 2012:

• Customersperemployeeincreasedby85%;

• Generationoutputperemployeeincreasedby115%;

• Lengthofpower linesandundergroundcablesperemployee increased by 77%; and

•Assetvalueperemployeeincreasedby198%.

Acknowledgement

I would like to convey my sincere appreciation and thanks to the fellow Board Members for their continuous support and contribution throughout the year. Their commitment and direction was instrumental in ensuring that FEA remained focused and on-track to achieve its strategic goals and objectives.

I would like to thank the Cabinet, especially the Honourable Minister for Works, Transport & Public Utilities and the Honourable Minister for Public Enterprises, for their invaluable support provided to FEA during the year.

To our valued customers, we will continue to explore and implement ways in which we can further improve our services to meet or exceed your expectations.

To our Management Team and employees, I am highly appreciative of your efforts and contribution during the year. The level of dedication and commitment that you and our outsourced service providers showed throughout the year has enabled us to energise our nation under very challenging conditions.

FEA Board Chairman, Mr Nizam-ud-Dean, signing the contract with Siemens New Zealand at the FEA Head Office for the manufacture, supply, testing and commissioning of 4x11kV/132kV, 25MVA generator transformers for the Wailoa Power Station. This project is part of the Monasavu Hydro Scheme Half-life repair and maintenance work.


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The FEA Board developed eight Key Performance Indicators (KPIs) for 2012 to enable the Government to measure the performance of the FEA Board. The KPIs were included as part of FEA’s Statement of Corporate Intent (SCI) for 2012. The actual achievement of the KPIs is detailed below:

Achievement of Board Key Perfomance Indicators

Key Perfomance Indicators Final Outcome

1 Achieve a Return on Shareholders’ Funds (ROSF) of at least 2.5% provided the proposed average tariff of 39.4c/unit is retained in 2012 and the assumptions on the demand and supply for 2012 does not change substantially.

ACHIEvED. Audited ROSF as at end of December, 2012 is positive 13.6%. This is due to the good rainfall received at the Monasavu catchment early in the year which enabled good utilization of hydro throughout the year and stringent control of operational expenditure by Management.

2 Fully comply with the following statutory requirements:

Submission of 2013 to 2015 Corporate Plan, Statement of Coporate Intent (SCI) for 2013 and Employment Industrial Relation Plan (EIRP) for 2013 by 30th September 2012

Submission of half-year report for 2012 financial year by 1st August 2012

Submission of draft annual report and un-audited financial accounts for 2011 by 31st March 2012

Submission of the annual report and audited financial accounts for 2011 by 31st May 2012

ACHIEvED. Submitted on 30th September, 2012.

ACHIEvED. Submitted on 30th July, 2012.

ACHIEvED. Submitted on 29th March, 2012.

ACHIEvED. Submitted on 29th May, 2012.

3 Award tender for the procurement of materials and construction of the new 33kV transmission line from Vuda to Waqadra and associated sub-station development at Vuda and Waqadra Zone Sub-stations subject to availability of funds.

1. ACHIEvED. Procurement of Materials:

•Tenderswereawardedforthesupplyof75kmofoverheadNEONconductorand for the supply of 28km of 300 sq-mm underground cable.

•Tenderwasawardedforthesupplyof150x17mHardwoodpoles.

2. ACHIEvED. Transmission Line Construction:

• Tenders were awarded for the construction of the 33kV Vuda-Waqadratransmission line in stages to two powerline contractors.

3. ACHIEvED. Zone Sub-station Augmentation:

• TenderwasawardedfortheAugmentationoftheZoneSub-stationsatVudaand Waqadra.

4 Ensure that the Nadarivatu Hydro Power Project is fully commissioned by 31st March 2012.

The project was fully commissioned on 18th May 2012. There was a slight delay in the commissioning as a result of the two floods experienced in early 2012.

5 Ensure that the construction of the Dreketi Electrification Scheme progresses according to the project schedule for the year 2012.

ACHIEvED. Way-leaves for the new transmission line and land for zone substations were acquired. The materials for the transmission line were ordered and erection of power poles commenced. By year end 2012, 70% of vegetation clearing along the line route was completed and 80 power poles erected. Design of the three zone substations also commenced. The project progressed according to the plan.

6 Ensure that the construction of the Wainisavulevu Weir Raising Project progresses according to the project schedule for the year 2012.

ACHIEvED. Mobilisation on site was 70 percent complete. The Engineers’ accommodation and facilities at Monasavu Depot was fully operational.

Temporary power supply for the Sinohydro camp was being established by FEA by the end of the year.

The survey work including the geotechnical investigation was completed and the data was given to MWH, the Owner’s Engineers, to finalise design on the embankment. Project progressed according to plan in 2012.

7 Execute the Monasavu Hydro Scheme Half-Life refurbishment program as per plan.

ACHIEvED. Phase-1 of the Half-Life repair & maintenance work of the Mona-savu Hydro Scheme progressed according to work plan. As per plan some 12 activities were carried out successfully at a cost of around FJ$13M.

8 Establish financial viability on the conversion of the two Vuda Wartsila Generating Sets from Industrial Diesel Oil (IDO) to Heavy Fuel Oil (HFO) operation and if positive, commence implementation and complete Project as per plan.

ACHIEvED. Financial viability established with positive outcome. Project was completed and commissioned in May 2012. FEA achieved fuel savings of around FJ$4M in 2012.

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Key Perfomance Indicators Final Outcome

1 Achieve a Return on Shareholders’ Funds (ROSF) of at least 2.5% provided the proposed average tariff of 39.4c/unit is retained in 2012 and the assumptions on the demand and supply for 2012 does not change substantially.

ACHIEvED. Audited ROSF as at end of December, 2012 is positive 13.6%. This is due to the good rainfall received at the Monasavu catchment early in the year which enabled good utilization of hydro throughout the year and stringent control of operational expenditure by Management.

2 Fully comply with the following statutory requirements:

Submission of 2013 to 2015 Corporate Plan, Statement of Coporate Intent (SCI) for 2013 and Employment Industrial Relation Plan (EIRP) for 2013 by 30th September 2012

Submission of half-year report for 2012 financial year by 1st August 2012

Submission of draft annual report and un-audited financial accounts for 2011 by 31st March 2012

Submission of the annual report and audited financial accounts for 2011 by 31st May 2012

ACHIEvED. Submitted on 30th September, 2012.

ACHIEvED. Submitted on 30th July, 2012.

ACHIEvED. Submitted on 29th March, 2012.

ACHIEvED. Submitted on 29th May, 2012.

3 Award tender for the procurement of materials and construction of the new 33kV transmission line from Vuda to Waqadra and associated sub-station development at Vuda and Waqadra Zone Sub-stations subject to availability of funds.

1. ACHIEvED. Procurement of Materials:

•Tenderswereawardedforthesupplyof75kmofoverheadNEONconductorand for the supply of 28km of 300 sq-mm underground cable.

•Tenderwasawardedforthesupplyof150x17mHardwoodpoles.

2. ACHIEvED. Transmission Line Construction:

• Tenders were awarded for the construction of the 33kV Vuda-Waqadratransmission line in stages to two powerline contractors.

3. ACHIEvED. Zone Sub-station Augmentation:

• TenderwasawardedfortheAugmentationoftheZoneSub-stationsatVudaand Waqadra.

4 Ensure that the Nadarivatu Hydro Power Project is fully commissioned by 31st March 2012.

The project was fully commissioned on 18th May 2012. There was a slight delay in the commissioning as a result of the two floods experienced in early 2012.

5 Ensure that the construction of the Dreketi Electrification Scheme progresses according to the project schedule for the year 2012.

ACHIEvED. Way-leaves for the new transmission line and land for zone substations were acquired. The materials for the transmission line were ordered and erection of power poles commenced. By year end 2012, 70% of vegetation clearing along the line route was completed and 80 power poles erected. Design of the three zone substations also commenced. The project progressed according to the plan.

6 Ensure that the construction of the Wainisavulevu Weir Raising Project progresses according to the project schedule for the year 2012.

ACHIEvED. Mobilisation on site was 70 percent complete. The Engineers’ accommodation and facilities at Monasavu Depot was fully operational.

Temporary power supply for the Sinohydro camp was being established by FEA by the end of the year.

The survey work including the geotechnical investigation was completed and the data was given to MWH, the Owner’s Engineers, to finalise design on the embankment. Project progressed according to plan in 2012.

7 Execute the Monasavu Hydro Scheme Half-Life refurbishment program as per plan.

ACHIEvED. Phase-1 of the Half-Life repair & maintenance work of the Mona-savu Hydro Scheme progressed according to work plan. As per plan some 12 activities were carried out successfully at a cost of around FJ$13M.

8 Establish financial viability on the conversion of the two Vuda Wartsila Generating Sets from Industrial Diesel Oil (IDO) to Heavy Fuel Oil (HFO) operation and if positive, commence implementation and complete Project as per plan.

ACHIEvED. Financial viability established with positive outcome. Project was completed and commissioned in May 2012. FEA achieved fuel savings of around FJ$4M in 2012.

The pictures above depict work in progress on the construction of a 33kV transmission line from Cawaira power station in Labasa to Dreketi and establishment of zone substations at Cawaira, Seaqaqa and Dreketi. The total estimated cost of the project is $14.3M and this cost is being equally shared between the Government and FEA.

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FEA set a target at the beginning of 2012 that it must perform and turn around the weak working capital recorded at the end of 2011 of some $3.4M in order to achieve the following key objectives in 2012:

• Repaybondsandloansofaround $41.3M maturing in 2012;

• FundthecompletionofNadarivatu Hydro Project and other critical capex totalling $56M from internal cash flows;

• Ensurethatthedebtcovenantswith Lenders are not breached so that Government, being the sovereign guarantor of the FEA loans, is not exposed; and

• Ensurethattherepairsandmaintenance of critical assets considered as its “golden goose” are carried out on time with available internal funds. In this regard, FEA to commence phase one of the Monasavu Hydro Scheme half-life repair and maintenance work estimated to cost some $13M in 2012.

It is a tribute to the robust business model that FEA adopted in 2012 which was geared towards making profits that enabled the achievement of all of the above objectives.

Chief Executive Officer’s Report

FEA performed admirably in 2012 recording a profit after tax of $75.3M despite the two flash floods in early January & March and Cyclone Evan in December causing substantial damages to the FEA transmission network infrastructures throughout Fiji. This profit was achieved partially due to the excellent performance from the Monasavu Hydro Scheme which produced 466GWh of energy in 2012 which is above the long term average of 400GWh, commissioning of the Nadarivatu Hydro Scheme and stringent measures put in place to control operational expenditure. The two flash floods & Cyclone Evan incurred restoration costs amounting to $6.3M in 2012.This cost was not budgeted for by FEA in 2012.

The next three years will bring a lot of challenges to the Authority. The impact of the reduction in the electricity tariff by 5% from 1st January 2013 is substantial and will require adjustment to be made to FEA’s business model. FEA envisages a total capex of around $198M and repayment of matured bonds and loans totalling $95M over the period 2013-2015. This is a huge financial commitment and requires that FEA must make profits and generate cash surplus in order to have the ability to fund these CAPEX (averaging $66M annually) and repay matured bonds and loans when they fall due. The total bonds and loans maturing in 2013 are around $36M. FEA’s financial performance over the next 3 years will be critical in determining how successfully it can fund the above commitments. It will have to keep aside surplus cash of at least $40M a year and this means that FEA has to record good levels of profitability to generate the necessary cash reserves required. FEA has to make a profit after tax of at least $40M annually over the next 3 years to achieve the above plans. Therefore, it is imperative that FEA adopts a business model that will achieve the desired profitability level to ensure that it remains financially sustainable. However, this will depend on the amount of rainfall at Monasavu and Nadarivatu, the global fuel price and the electricity tariff.

Further, now that Nadarivatu Hydro Project is fully commissioned and in operation, FEA’s focus over the next three years will be to maintain its ageing assets that have been in service for some 30 plus years. Bulk of these assets are the FEA power network assets and the Monasavu Hydro Scheme. This will be another huge investment by FEA. Once the maintenance of these assets are completed, it will improve the reliability and security of power supply to customers.

Finally, I thank the Chairman and the Board Members for their valuable guidance and constructive support throughout the year. I wish to record my thanks and appreciation to my colleagues in the Executive Management team and to all the employees of our organisation and other external service providers for their continuing support, dedication and patience throughout 2012.

I also record my sincere thanks and appreciation to the Honourable Prime Minister and his Cabinet Ministers, Permanent Secretaries and Government officials, the Reserve Bank of Fiji, the Fiji Commerce Commission, the Fiji Revenue & Customs Authority and the executives of the Bargaining Units for their kind assistance, support and cooperation rendered in 2012.

The invaluable contribution of one and all mentioned above made it easier for FEA to rise above the challenges faced during the year and perform exceptionally well.

I look forward to their continued support in delivering increased value to our Shareholder and Stakeholders in the coming year.

Hasmukh Patel Chief Executive Officer

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FEA places great importance on addressing the concerns of its customers with urgency. Customer service representatives provide services to customers on a daily basis at all major locations.

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2012 | Year in Review

CUStoMerS

Customer Service

The number of customer accounts increased by 2% from 155,912 in December 2011 to 159,018 in December 2012. The customer accounts are made up of: Industrial 93 (0.06%); Commercial 14,828 (9.32%) and Domestic and Institutional 144,097 (90.62%). The increase in customer accounts was mostly in the Domestic Sector recording a growth of 2%, most of which were in remote rural areas as a result of the Rural Electrification projects mainly funded by the Government and FEA. There was a decrease in demand for electricity by an overall 1.2% from 740.87M units in 2011 to 731.63M units in 2012. The main decrease in electricity consumption was in the Domestic sector, with demand decreasing by 2.38% from 218.5M units in 2011 to 213.3M units in 2012. Demand also decreased by 0.96% in the Commercial sector and in the Industrial (Maximum Demand) sector it dropped by 0.46%. The reduction in electricity demand for the Domestic, Commercial and Industrial sectors could be attributed to the power outage in the Central region for a period of 6 days in April due to a landslide that caused one of the 132kV transmission towers to fall. Futhermore, the power supply in the Central, Western and Northern divisions were affected during Cyclone Evan in December and during the two floods in early 2012. These natural disasters also contributed to this reduction. The Government subsidy given for domestic customers who use less than 75 units per month also contributed to the reduction in consumption with customers reducing electricity consumption to attract Government subsidy requirements and thus take advantage of the subsidy offered.

Contact Centre

The Contact Centre continued its good performance in 2012. The Grade of Service (GOS) achieved for the year was 85.6% with Calls Abandoned at 8.6%. This was a good result in a challenging year where the Contact Centre was required to manage information flow to customers on the review in consumer security deposit, disconnection and reconnection of electricity accounts, prepayment issues, planned power outages and power outages during natural disasters. Total calls received as at 31st December 2012 were 428,756, an average of 35,729 calls a month. This was an increase of 16.7% from 2011 when a total of 367,149 calls were received. The increase in call volume was the result of enquiries made regarding the review of the consumer security deposit

and queries on power restoration plan after Cyclone Evan that affected all of FEA’s customers in December 2012. With a concentrated and coordinated approach in 2013, it is anticipated that the call volume will decrease. The focus continues to be on the quality of service delivered to the individual customers by Contact Centre staff when answering the calls. The Contact Centre continues to operate 24hours, 7days a week with the main Contact Centre in Suva closing at 9.00pm and services taken over by Contact Centre staff at the National Control Centre in Vuda. Usage of the emergency 913 number for non emergency calls by customers continues to be a concern with a total of 19,998 calls received on this number of which only 3,719 were genuine emergency calls.

For the 2012 Customer Services Survey, six survey questions were prepared and survey forms sent out to customers with their electricity bills in December 2012. The forms were received and analysed.

Whilst FEA is pleased with the improvement in its overall customer satisfaction level, it wishes to continually improve its level of service to customers. Accordingly, it has put in place appropriate action plans to address the areas for improvement highlighted in the survey. In the meantime, FEA is also investigating how it could improve the reliability of customer survey in future years to obtain views from a majority of its customers rather than a minority.

Prepay Customers

The online Syntel prepayment vending system is now being used by all prepayment vendors and there are a total of 25 prepayment vendors located in the Central and Western divisions. Customers can buy their tokens from any of these prepayment vendors. Through this online vending system the Authority is able to manage its prepay customers better. Most of the rural customers are metered using prepayment meters with installation of more than 1,778 prepayment meters in 2012.

Product Awareness

Awareness on energy savings and electrical safety tips were the main focus of FEA’s communication activities to its customers. Presentations were carried out in schools and communities to create awareness on energy savings and electrical safety. FEA made full use of its billing network to maximise the exposure of its safety messages by printing messages on the electricity bill itself and bill inserts.

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Visits were made to prospective rural customers in villages to complete customer documentation, provide information on energy conservation and electrical safety and training on how to use the prepayment meter prior to connection.

Television interviews and participation in radio talkback shows were carried out for creating public awareness and dissemination of information regarding the Authority’s operations.

A new format of the electricity bill was implemented in 2012 whereby the Consumer Security Deposit held in cash or Bank Guarantee by FEA for each customer’s account was clearly stated on the customer’s bill.

Demand Side Management

FEA carried out energy meter calibration of its top 150 customers Fiji Wide. This was the first of this kind of project undertaken by FEA as part of its value adding initiative to ensure that the Customer’s meters were functioning properly and recording correct consumption.

FEA also replaced 5,000 old energy meters installed at customers’ premises and will continue with this replacement of old energy meters during the next 5 years to ensure correct recording and billing of electricity consumption.

FEA continues to assist its customers to become more energy efficient by providing technical advice and billing data to those customers who request for such data. In 2012, the Demand Side Management Team of FEA carried out a walk-through energy audit for the FRCA complex in Nasese. A report outlining the energy management opportunities has been prepared for the customer.

FEA’s Reactive Metering Policy was strictly monitored during 2012 with reactive energy metered for those customers using excessive reactive energy and not complying with the power factor requirements as stipulated in the Electricity Act. Customers’ excessive reactive energy usage decreased by around 14.4% in 2012 when compared to 2011.

Electricity Tariff

There was no change in the electricity tariff for the year 2012. All domestic customers who used less than 75 unitspermonth(dailyaverage<=2.47units)weregiventhe Government subsidy of 17.64 cents per unit and this subsidy was given through their monthly bills. For

schools, the government subsidy of 14.25 cents per unit was given for the first 200 units they used in a month.

Due to the tariff increase in April 2011, a review of all consumer security deposits became necessary under the Electricity Act and resultantly was carried out and implemented in late 2011 and completed in 2012. The new consumer security deposits required were to be fully paid by May 2012. FEA then extended the time frame for payment of the additional consumer security deposit by 3 months for Commercial Customers and 6 months for Domestic customers due to the floods and financial difficulties faced by the customers at the beginning of 2012. Customers had the option of paying the additional consumer security deposit in cash or by providing a Bank Guarantee.

HUMan reSoUrCeS, traInInG & DeveLopMent, HeaLtH, SaFetY & envIronMent

The advent of the new millennium saw human resources trusted to being the most strategic resource of any organization, and knowledge being the number one competitive edge. While some organizations treat these as cliché and go no more beyond lip service, the Fiji Electricity Authority arduously enhances the human capital capacity to face the future.

As we embraced this challenge, questions arose as to how to effectively implement this. Some of the key questions that needed to be answered included: How do we determine the optimum level of human resource required to achieve the organization’s vision, mission and values? How do we attract the best and be the employer of choice? What is the current human capital competency level? What strategies should we employ to ensure our human capital support organizational change programme? How do we best hone and enhance their capabilities? How do we best reward our performers and address the issue of non-performance?

While this list is not meant to be exhaustive, it spells out some of the challenges in making our human capital management a success. The first of these initiatives not only harnesses new ideas and innovative thinking from people all across the company, but more importantly it makes clear the value we place on innovative thinking. Experience has shown that the spark of an idea can eventually ignite a whole chain of innovative solutions that

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enhance our reliability, reduce our costs, help to protect the environment, and make us a more competitive company.

The self-development program also represents a new paradigm in Human Resources. This initiative encourages employees to assume a more active role in their own development, and is part of a shift away from highly structured, traditional training and development programs, and towards the concept of continuous learning. Both of these programs are vital to the successful utilization of human capital. Today, technology is beginning to render traditional organizational boundaries meaningless with the creation of virtual communities of practice, cross-disciplinary knowledge sharing, and a greater flow of information and ideas then ever before.

Today’s business climate also underscores the premium that we all place on performance and productivity. That in turn forces us to recognize that truly productive employees take satisfaction in achieving meaningful goals, in providing for their families, but also in promoting the prosperity of their society. But even more important is the total value proposition of a job, which includes not only financial compensation but also opportunities for personal and professional growth, a healthy atmosphere at work, and a corporate culture and ethos aligned with the individual’s own value system. In the end, then, job satisfaction is largely the feeling of accomplishment that an employee enjoys at the close of the day or the end of a shift, knowing that he or she is making a tangible difference in the wider world.

Human Resources SBA took a quantum leap with its major achievements in order to connect with its people and be able to realize its Strategic Plan:

• Energizer introduced as a monthly newsletter,

• HR Team introduced a Friday wear T-shirt as Team Energizer,

• Turn around time in recruitment and selection,

• Turn around time in payroll processing from 3 days to 2 days,

• HR SBA Leadership Workshop in Nadi to map out Strategic Plans till 2015,

• Jointly coordinated corporate social responsibility,

• Introduction of a uniform email signature for all FEA Staff,

• Introduction of 5 Quality Circle Teams,

• Training records went online,

• Retiring Staff recognized with certificate and service plaque,

• Corporate Fun & Staff Recognition Day,

• Long Service Employees with 30 years of service were recognized,

• Entire organisation is on a Performance Management System.

Employee satisfaction comes only when a person’s activities and responsibilities are aligned with the overall mission of his or her organization. In other words, when human capital contributes to a company’s success, it enhances the institution’s ability to achieve its goals and meet its commitments. Each employee was paid out a performance pay based on his or her perfomance in 2011.

Employees with 30 years of service being recognised by FEA at the Corporate Fun Day held in December 2012.

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The Staff Turnover rate from 1st January 2012 to 31st December 2012 was 4.59% when compared to the same period in 2011 which was 4.95%. Note: Staff Turnover does not include those employees who were terminated by the Authority.

Training & Development

In 2012 the focus on training and development revolved around Mandatory Authorisation, Refresher training including Contractor Management, Safety Awareness Training, In-House Training, Technical Management Development Training and On-the-Job Training at Nadarivatu Hydro Project. Training represents an investment in performance hence the Training and Development Framework was designed to ensure that all training and development programs were aligned to the individual employee’s career development plans and the Authority’s succession plans and every single cent that was invested in training and development added value to the organization in alignment to the framework.

Two Training programs were conducted In-House for 20 nominated Power Utilities in the Pacific Region in Occupational Health and Safety (OHS), Power Generation, Network Operation and Maintenance Modules. In-House Training by FICAC team was conducted for 81 FEA employees in the three regions (Central/West/North) and is expected to continue in 2013 to cover all FEA employees. A total of 67 middle management employees underwent a Management Development Program in-house which was run by an external expert. The 33kV and 132kV Live Line teams Refresher training was also conducted by an external accredited Trainer. A total of 148 Training programs were conducted by the FEA Training team in 2012.

The Authority continues to engage practical attachees from the Fiji National University, University of the South Pacific and University of Fiji as part of their program requirement for graduates and who are registered by the National Employment Centre. This is an opportunity for the Authority to ensure that these practical attachees receive the relevant practical training and development in preparation for lucrative employment opportunities. The Authority continues to capture this opportunity to mitigate staff retention risks in all technical areas. The Authority accepts that the staff turnover in the technical areas will continue due to lucrative employment opportunities abroad. The Authority also accepts that it will never be able to compete with overseas employers in the terms and conditions of employment offered to the Authority’s employees.

The recruitment of 10 apprentices and 38 Trainee Line Mechanics was a step forward to ensure that skilled and competent employees are readily available to replace employees who leave the Authority over a period of time.

Furthermore, the Apprenticeship & Network Trainee Line Mechanics’ programs will ensure that the Authority would be able to identify the most competent employees with the right attitude and culture for further development in leadership roles within the organization. The Authority would consider the recruitment of additional apprentices and Trainee Line Mechanics in future. The Training

Department is now working with the various Strategic Business Units (SBUs) to develop individual employee training and development plans and we expect to fully implement this approach in 2013 and 2014 respectively.

The Authority has lodged its submission to register with the Fiji Higher Education Commission pursuant to Higher Education Promulgation 2008. It is the requirement of the Promulgation for all training providers to first acquire recognition and then register themselves with the Fiji Higher Education Commission.

Health, Safety & Environment

A comparative analysis of the Fiji Electricity Authority’s Health, Safety and Environment performance for the last 5 years proves that the year 2012 had been a volatile year for FEA in terms of record accident rates and cost. A total of 11 Lost Time Injuries (LTI) were recorded resulting in 87 Lost Days (LD). Lost Time Injury Frequency (LTIF) record was 8.24 against a target of 0 and a Best Practice benchmark of 5.4. Lost Time Injury Duration (LTID) recorded was 7.91 days against a target of 0 and a Best Practice benchmark of 4. Nil fatality was recorded in 2012.

On a positive note, a total of 1,064 corrective actions were identified arising out of Safety Visits, Hazard Reports and HSE committee meetings. By year end, 93% of these corrective action items were completed.

The FEA Board and Management staff fully appreciate the need to arrest these alarming figures and have put in place strategies to address this problem in 2013. Critical incidents have been thoroughly analyzed to identify the root cause of these accidents and improvement strategies have been developed to address the way FEA carries out its business in future to reduce the accident rate.

Preliminary discussions have been held with the Land Transport Authority and the Fiji Police Force to seek their contribution in assisting FEA reduce its vehicle accident rate. Both parties have indicated their willingness to offer their expertise in developing safe driving programs tailored to suit FEA’s needs. Further discussion will be made before a safe driving program is developed and implemented in 2013.

FEA is totally focused on a continuous improvement culture to achieve the ultimate goal, which is “SAFE PRODUCTION, ZERO INCIDENTS”.

In conclusion, from a business perspective, sustainability is a company’s ability to achieve its business goals and increase long-term value by integrating economic, environmental and social opportunities into its business strategies.

The Management mapped out some of the specific actions that the Human Resources Team will assist to develop these qualities: inculcating sustainability oriented values, helping to elicit senior management support for making sustainability central to business strategy, supporting the development of metrics and systems alignment around sustainability, and enabling the organization to achieve broad stakeholder engagement and holistic integration.

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proDUCtIon oF eLeCtrICItY

Water Management

The storage level at the Monasavu Dam at the beginning of 2012 was 741.17 metres above mean sea level (AMSL), which was 26.17 metres above the minimum safe operating level of 715 metres. The high water level was the result of above long term average rainfall received in the months of November and December 2011. Also this high water level enabled FEA to maximize its hydro operation and reduce the consumption of expensive thermal fuel in 2012.

Above-average rainfall during the months of February, April, July and December 2012 helped maintain the storage level to 739.66 metres AMSL at the end of the year after good usage of the water for power generation.

Total rainfall received at Monasavu in 2012 was 5,617mm compared with 4,925 mm in 2011. The lowest ever rainfall recorded was 3,540 mm in 2004.

In 2012, the FEA renewable power stations generated 532,070 Mega Watt-hours (MWh) of electricity (64.6%), thermal power stations 271,283 MWh of electricity (33%) and Independent Power Producers (IPPs) generated 19,451MWh of electricity (2.4%).

The average power generation mix for 2012 was 63.6% hydro, 33% diesel and heavy fuel oil, 1% wind with the remaining 2.4% provided by the Independent Power Producers (IPPs), namely Tropik Wood Industries Limited (TWIL) and Fiji Sugar Corporation (FSC). FEA replaced the short fall in the annual deemed supply from TWIL by burning expensive thermal fuel. In comparison, 55% was generated from hydro in 2011, 40% from diesel and heavy fuel oil, 1% from wind with the remaining 4% from TWIL and FSC.

The 9.3MW wood-fired co-generation plant of TWIL at its Drasa mill suffered a major boiler problem and produced only 4.87GWh of energy in 2012 out of a contracted quantity of 38.8GWh per annum. FEA is working closely with TWIL to ensure the plant is repaired at the earliest and is able to generate the deemed quantity of 38.8GWh annually. TWIL has informed FEA that the plant will be back in operation by November 2013.

Power System Reliability

Three internationally accepted performance indicators are used each year to measure FEA’s power system reliability:

• Theaverage total lengthof time that a customer iswithout power over a year is measured by the System Average Interruption Duration Index (SAIDI). Against a target of maximum 750 minutes, the Authority achieved a SAIDI of 666 minutes in 2012.

• Theaveragenumberoftimesthatacustomer’spowersupply is interrupted in a year is measured by the System Average Interruption Frequency Index (SAIFI). Against a target of 15 times, the Authority achieved a SAIFI of 9 times in 2012.

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The storage level at the Monasavu Dam at the beginning of 2012 was 741.17 metres above mean sea level (AMSL), which was 26.17 metres above the minimum safe operating level of 715 metres. The high water level enabled FEA to maximize its hydro operation and reduce the consumption of expensive thermal fuel in 2012.

The converted Heavy Fuel Oil power generating plant and the newly established fuel tank farm was commissioned in May 2012. The total project cost was around FJ$10M and the payback period is expected to be 2 and 1/2 years.

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• Theaverage time thatacustomer iswithoutpowerper interruption is measured by the Customer Average Interruption Duration Index (CAIDI). This index was some 74 minutes in 2012.

The main reasons for the power interruptions that occurred in 2012 were:

• Plannedmaintenanceworksonoverheadpowerlinesand underground cables (12%)

• Natural disasters e.g. flood, lightning, cyclone, etc. (73%)

• Faultsonpowerlinehardware(10%)and

• Vegetationinterferingwithpowerlines(5percent)

FEA needs to spend a substantial amount of funds to reinforce its power system in order to improve the reliability of power supply to be in line with international benchmarks for power utilities of similar size and nature.

The initiatives FEA is currently pursuing include:

• Live-linemaintenanceofitspowerlinesatallvoltagelevels;

• Effectivevegetationmanagementprogram;

• Useofappropriatetechnologytodetectdefectsthatcan be fixed on time and equipment that can restore power supply quickly; and

• Ensuringthatadequatesupplycapacityisavailabletomeet the demand for electricity at all times.

FInanCIaL perForManCe

Profitability

FEA made a financial profit of $75.3M after tax in 2012, largely due to the excellent performance from the Monasavu Hydro Scheme, commissioning of the Nadarivatu Hydro Scheme and stringent measures put in place to control operational expenditure. This profit equates to a Return on Shareholder Funds (ROSF) of positive 13.6%.

The profit recorded for 2012 includes an income tax benefit of $13.5M as a result of the Ministry of Finance granting a 40% fuel investment allowance for the Nadarivatu Hydro Project. Had this allowance not been approved, FEA would have recorded an income tax expense of $12.4M in 2012 and this would have resulted in a profit after tax of $49.4M and a Return on Shareholder Funds (ROSF) of positive 9.4%.

Earnings before interest, tax, depreciation and amortization (EBITDA) for 2012 were $113.2M. This provided an EBITDA net interest coverage ratio of 4.8 times.

Revenue from electricity sales for 2012 was $290.4M compared to $288.7M in 2011, an increase of $1.7M. This was a result of the increase in electricity tariff for commercial and industrial customers which became applicable from 1st April 2011 and was applied throughout 2012.

Other operating revenue of $5.8M in 2012 was lower by $11M compared to the $16.8M earned in 2011. The $16.8M for 2011 included a one-off insurance claim for the diesel generator (G8) failure at Kinoya Power Station.

The total operating expenses of FEA excluding fuel costs, depreciation and amortization was $77.9M. This increased by $4M when compared with the $73.9M incurred in 2011. This is due to the two floods and Cyclone Evan restoration costs incurred by FEA in 2012.This cost was not budgeted for by FEA.

Depreciation expense increased by $4.6M in 2012 due to the depreciation for additional assets transferred from Capital Works in progress to the Fixed Assets Register in 2012 which included the newly built Nadarivatu Hydro Scheme which was commissioned in May 2012.

The net thermal fuel cost decreased substantially by $32.8M in 2012, from $137.9M in 2011 to $105.1M in 2012.This was due to maximizing hydro generation from the Monasavu Hydro Scheme together with the additional hydro generation from the newly built Nadarivatu Hydro Scheme. The thermal fuel cost accounted for 48% of FEA’s total operating expenses of $218M in 2012 compared with 57% in 2011.

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Electricity generated from the thermal power stations decreased significantly by 68GWh in 2012. This was due to the good rainfall received at the Monasavu dam and commissioning of the Nadarivatu Hydro Project.

The Wailoa hydro power station generated 467GWh of energy in 2012, higher than the 425GWh that was recorded in 2011. Total quantity of IDO fuel burnt in 2012 was 30,694 tonnes and HFO fuel burnt was 28,302 tonnes, aggregating to 58,996 tonnes. In comparison, the total quantity of IDO fuel burnt in 2011 was 53,238 tonnes and HFO was 17,648 tonnes, aggregating to 70,886 tonnes.

The average price of IDO fuel was $2,057VEP per tonne in 2012 (against a budget price $1,900VEP per tonne) compared to an average price of $2,079VEP per tonne in 2011. The IDO price peaked at $2,274VEP per tonne in April 2012.The average price for HFO was $1,483VEP per tonne in 2012 (against a budget price $1,500VEP per tonne) compared with an average price of $1,542VEP per tonne in 2011.

Net financing costs increased by $7.1M in 2012 from $11.3M in 2011 to $18.4M in 2012. This is attributed to the new loans of around $13M raised by FEA in 2012 to fund new capital projects, funding for the Nadarivatu Hydro Project and the reduction in capitalised interest which ceased from 17th May 2012 as a result of the commissioning of the Nadarivatu Hydro Project.

Financial Strength

FEA’s gearing ratio, as measured by Debt to Debt plus Capital and Reserves excluding cash-in-hand, was 34.3% as at 31st December 2012, which was well within the international benchmark for power utilities of about 45%, despite incurring Capital Expenditure of around $55.9M in 2012 and raising new loans of around $13M.

The shareholder value of FEA was $552M at the end of 2012 which increased from $472M at the end of 2011 and $324.9M at the end of 2002. FEA’s total assets were worth $1.03B, a substantial increase from $983M in 2011 and $456.7M in 2002. This shows that FEA has added significant shareholder value over the last 10 years since the implementation of organisational reforms.

Capital Expenditure & Funding

FEA incurred a total of around $56M on capital projects in 2012, compared with $112M in 2011.This was made possible through the good cash flows generated in 2012 as a result of recording good profit throughout the year.The Capex of $56M was made up of the Nadarivatu Hydro Project and Wainisavulevu Weir Raising Project ($30M), Network Augmentation Projects ($8.1M), HFO Conversion Project at Vuda ($3.6M), purchase of FEA Head Office ($6.6M), purchase of 7x1.6MW Cummings Generator sets ($0.6M), Rural and Urban Reticulation works carried out in 2012 ($2.9M), Protection Upgrade works ($0.4M), replacement of motor vehicles ($1.9M), purchase of new energy meters ($1.3M) and other assets acquired in 2012 valued at $0.6M.

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100

90

80

70

60

50

40

30

20

10

0

IDO

F$ P

ER T

ONNE

200

Dec

12

Dec

11

Dec

10

Dec

09

Dec

08

Dec

07

Dec

06

Aug

12

Aug

11

Aug

10

Aug

09

Aug

08

Aug

07

Aug

06

Apr 1

2

Apr 1

1

Apr 1

0

Apr 0

9

Apr 0

8

Apr 0

7

Apr 0

6

Dec

05

400

600

800

1000

1200

1400

1600

1800

2000

2200

0

HFO

IDO & HFO Fuel PricesThermal Fuel Cost

F$ M

illio

n

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

010

20

30

40

50

60

70

8090

100

110

120

130

140

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FEA acquired the necessary funding to complete the Nadarivatu Hydro Project in 2012. All the debt covenants imposed by lenders were satisfactorily met in 2012. This is essential to ensure that Government being the sovereign guarantor of the FEA loans is not exposed. FEA had a total debt portfolio of around $329M as at 31st December 2012. This debt has to be serviced and repaid over the next 15 years. Around $36M of the total debt is due in 2013, $25M in 2014 and $34M in 2015 in addition to FEA’s CAPEX plan of $58M for 2013, $67M in 2014 and $73M in 2015.

These commitments are tabulated below and shows that FEA will have to make handsome profits to be able to honour these financial commitments over this period.

2013$M

2014$M

2015 $M

Debt 36 25 34

CAPEX 58 67 73

Total Cash 94 92 107

As shown in the table above, FEA’s financial performance over the next 3 years will be critical in determining how successfully it can fund the above commitments. It will have to keep aside cash surplus of at least $40M a year and this means that FEA has to record reasonable levels of profits to generate the necessary cash reserves required. Therefore, it is imperative that FEA adopt a business model that will achieve the desired profitability level to ensure that it remains financially sustainable over this period.

In view of FEA’s huge capital expenditure plan, the Ministry of Finance has approved the extension of the Government guarantee facility to the end of December 2013.

FEA called for tenders for the refinancing of US$30M of the China Development Bank (CDB) loan in the local financial market to take advantage of the prevailing high liquidity and low interest rates in the domestic market. FEA received very competitive bids from the local financial institutions. The refinancing of this loan onshore in Fijian dollars will also eliminate any foreign currency exposures attached to this loan. FEA also received an indicative bid from the European Investment Bank (EIB) in this regard. The loan refinancing tenders will be evaluated and a final award will be made in January 2013. Further, FEA successfully rolled over 2X$20M ANZ loans and refinanced 1x$20M BSP loan at lower interest rates resulting in interest savings to FEA in 2012. FEA’s average cost of borrowing was 6.8% per annum as at end of 2012 compared to 7.4% per annum for 2011.

FEA’s Power Development Plan for 2010 to 2020 has identified some Power Generation, Transmission and Distribution Projects that have to be developed to meet the increasing demand of electricity which is expected to grow rapidly over the years. The total investment required will be in excess of $1.5Billion over a period of 10 years. FEA’s contribution is estimated to be around F$1.15Billion with around $0.35Billion coming from private investors interested in developing the power generation sector.

The key driver in achieving this plan is to have the right electricity tariff level for FEA.

InternaL aUDIt anD rISk ManaGeMent

Internal Audit

The FEA recognizes its responsibility to maintain a sound and effective internal control system to protect the assets of the company and minimize operational risks.

The Internal Audit department plays a crucial role in monitoring the internal governance of the FEA. The Internal Audit department is responsible for independently reviewing the risks and controls of FEA, and for providing reasonable assurance to the Executive Management Team and the FEA Board that all risks and internal control weaknesses are being adequately addressed. The Head of Internal Audit department supervises the implementation of comprehensive audits in accordance with the Board approved audit plan and reviews the financial and operational procedures and practices of the company on a regular basis.

To ensure the independence of the Internal Audit function, the Internal Audit Department submits regular audit and risk reports to the Board Audit & Finance sub-committee.

In 2012, the Internal Audit Department reviewed the risks and controls of critical areas of the company which comprised of review of fleet, fuel and oil, capital projects, customer services, tenders, fixed assets, contracts, human resources, and financials (debtors, creditors, petty cash, and bank reconciliation). Internal audit also assisted in the review of financial and operational procedures for some of the key areas and conducted follow up audits on the implementation of audit recommendations.

The reports of the audits conducted by the Internal Audit Department determined irregularities and internal control deficiencies which were presented to the Audit & Finance sub-committee of the Board. As a result, a number of staff members were disciplined for breaches of policies and procedures of the Authority. As required, the policies and procedures of the Authority were reviewed and revised accordingly and thereafter implemented. Training was conducted to the employees of FEA on the new and revised policies and procedures.

Risk Management

The activities of the FEA are always exposed to various types of risks, such as financial risks and operational risks which may prevent the organisation from achieving or enhancing its corporate goals and objectives. Hence, policies and procedures are required to be developed and implemented to manage these risks effectively. FEA’s risk management process aims to identify the risks that may have an effect on fulfilling the company’s objectives, assesses the risks using appropriate quantitative and qualitative techniques and manages the risks at the desired level of risk appetite. The process applies across the whole organization whereby one of the key performance indicators for the FEA requires that risks be minimized and the risk levels be reduced.

2726


In 2012, an annual review of the FEA’s Top Business Risks was undertaken which involved a review of the Authority’s Risk Register. The Risk Review highlighted some new potential risks to the Authority and at the same time indentified risks which the Authority had managed to mitigate and improve the risk levels. Action items were developed which were/will be implemented to mitigate the potential risks.

FEA also continued with the external Riscore Programme at its major critical sites namely Wailoa Power Station, Kinoya Power Station, Labasa Power Station, Vuda Power Station and the National Control Centre in its quest to manage the risks at these critical power facilities. All the five stations increased their Riscore scores where the improvement in scores for the five sites ranged from 8% to 10% which was a great achievement for FEA.

In addition to this, for the first time, FEA engaged the services of its Insurance Broker to compile detailed underwriting information for its major critical sites namely Wailoa Power Station, Kinoya Power Station, Labasa Power Station, Vuda Power Station and the National Control Centre to provide detailed information to the Insurers of FEA about the risk management strategies that FEA had deployed to manage its assets.

As a result, in September 2012, FEA successfully renewed its main insurance programme covering FEA’s assets including the Nadarivatu Hydro Power assets for another year at a reasonable premium despite the volatility in the insurance market after the insurers were satisfied with FEA’s business operations, including the level of maintenance of its assets and the controls that were in place to minimize or mitigate the risks.

poWer DeveLopMent proGraMMe

Independent Power Producers (IPPs)

The Authority expects private investors or IPPs to invest in the power generation sector to assist the Authority achieve its mission of achieving 90% of its energy requirements through renewable sources by 2015.

Presently there are two IPPs supplying electricity to the FEA grid. They are Tropik Wood Industries Ltd (TWIL) in Drasa, Lautoka and FSC which supplies the FEA in Lautoka and Labasa during the crushing season for some six months. The TWIL suffered a major plant failure in March 2012 and as a result were not able to supply the contracted quantity in 2012. TWIL plant is expected to be back in operation in November 2013 .

FSC plans to supply FEA in Labasa throughout the year as from June/July 2013. In this regard, a Power Purchase Agreement (PPA) will be signed between the two parties in 2013. Furthermore, FSC plans to establish a 40MW renewable energy plant in Rarawai in the next two to three years which will cater for the energy requirements of FSC Rarawai, as well as supply the energy requirements of Vatukoula Gold Mines and the surplus will be sold to FEA. Discussions on this project amongst the three parties are in progress.

In the last three to four years, FEA has signed some four PPAs with IPPs. Three IPPs are expected to commence operations in 2013 while the fourth one is expected to commence operations in 2015.

In the meantime, FEA continues to discuss other renewable projects with potential IPPs.

FEA Personnel carrying out repairs to damages caused by the flood in March 2012.

Tropik Wood Industries Plant at Drasa, Lautoka.

2928


Augmentation of the Transmission Grid

The electrical protection system on the two critical 132kV transmission lines from Wailoa to Vuda in the Western region and from Wailoa to Cunningham Road in the Central region was upgraded to state-of-the-art protection systems and this project was successfully completed including the integration of the electrical protection system for the Nadarivatu Hydro Scheme.

An Electrical Protection Review Study of the entire FEA power system was carried out to ensure safe and reliable system operation and Phase 1 of the recommendations were implemented.

Transmission Network

The 132kV Transmission Line Insulators were replaced on sixty (60) transmission steel-latticed towers along the 132kV Vuda – Nadarivatu – Wailoa and Wailoa – Cunningham Road transmission lines to improve the reliability and security of power supply to the Viti Levu customers.

Monasavu Hydro Scheme (MHS) Half-Life Repair & Maintenance

The following works were completed for the MHS Half-Life repair & maintenance works in the year 2012:

» Installed and commissioned three (3) 132kV Current Transformers (CTs) and three (3) Capacitive Voltage Transformers (CVTs) at Cunningham Road zone substation.

» 132kV Line Protection Upgrade works were completed for Line one (1) and Line two (2) at Wailoa Switchyard.

» Tender was awarded for replacement of 4 only 11kV/132kV generating Transformers at Wailoa Power Station and all Design works completed for manufacturing.

» Tender was awarded for 145kV Disconnector/Isolators, Earth Switch and control marshalling panel replacement at zone substations.

» Rust treatment of steel structures at 132kV zone substations was carried out as follows: Vuda and Wailoa Substation were 100% completed. Cunningham Road substation was 75% completed.

» Replaced 415Volts AC Switchboard with Automatic Transfer Switch at Cunningham Road and Wailoa zone substations.

» Completed Substation Earthing Studies and Analysis to ensure safety of personnel.

» Replaced 110Volts DC battery bank and charger for Cunningham Road and Wailoa zone substation.

Other Zone Substations

» Installed and pre-commissioned 22 X 11kV Switchgear panels at Labasa Power Station. The final commissioning and cut over is planned for June 2013. The estimated cost of the project is $3M.

» Installed and commissioned 4 X 33kV circuit breakers at Sawani Substation. The estimated cost of the project was $750k. The project has greatly improved the reliability of the power supply with removal of old GEC bulk oil and solenoid operated circuit breakers.

» Completed design works for the establishment of a 33kV/11kV zone substation at Denarau.

» Completed installation and commissioning of 110Volts DC Battery Bank in zone substations at Suva, Vatuwaqa, Korolevu, Vuda, Rarawai and Tavua.

Power Supply to Dreketi in vanua Levu

Construction of a 33kV transmission line from Cawaira power station in Labasa to Dreketi and establishment of zone substations at Cawaira, Seaqaqa and Dreketi are in progress and the project is scheduled for completion by the end of 2013.

On completion of the project, the power will be transmitted from Cawaira Power Station to Seaqaqa and Dreketi at 33 kilo-Volts (kV). The 33kV voltage will be stepped down at Seaqaqa and Dreketi zone substations to 11kV and power will then be supplied to the customers via the 11kV/415Volts distribution network that already exists in Seaqaqa and will be constructed as part of this project in Dreketi.

The total estimated cost of the project is $14.3M and this cost is being equally shared between the Government and FEA.

FEA personnel carrying out maintenance at Sawani Zone sub-station.

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Rural, Urban and Contract Projects

At the end of 2012, a total sum of $6,970,514 was authorized for rural, commercial/industrial, system reinforcement projects and contract works. Of this amount $1,798,475 was authorized for the construction of twenty (20) rural electrification projects, $3,563,619 was authorized for the construction of forty-one (41) commercial/industrial projects, $573,420 was authorized for seven (7) distribution system reinforcement schemes and $1,035,000 was utilized for eighteen (18) contract jobs.

InForMatIon & CoMMUnICatIon teCHnoLoGY

An ICT system performance level of 99.905% was achieved in 2012, exceeding the target of 99.8%.

The virtualized IT environment not only greatly reduced the planned downtimes for server hardware maintenance but also enabled them to perform during work/off-peak hours, further containing the operational costs at a low level.

To enhance and improve the Organization’s communications, the Authority’s messaging legacy system MS Exchange 2003, which was installed and commissioned in 2004, was upgraded to Microsoft Exchange 2010.

With the increased confidence in the Virtualized IT Environment’s Performance, Security, Scalability and Reliability, further plans to capitalize on the initial investment is being formulated.

To further strengthen the FEA’s Radio Telephone (RT) network to support the transmission and distribution network grid extension, the following repeater sites were being developed: Nubuiloa Repeater in Vanua Levu, Nasinu Repeater in Tailevu, and the Nadarivatu Repeater in Nadarivatu. These new sites will complement our

existing Radio Repeaters that have been developed over the years thus ensuring the reliable RT communications in the service areas most of which were newly electrified Rural Electrification Projects in the remote areas. The repeater sites will be fully established by the end of 2013.

The performance of the SCADA system, which is utilised by the National Control Centre to operate the power system, was satisfactory in spite of some major problems encountered in the main server due to the availability of the Disaster Recovery system for failover.

The overall ICT performance was excellent enabling the superior performance of FEA as a whole in terms of delivering reliable electricity to the customers.

CoMMerCIaL

The FEA’s Commercial SBU has a total manpower of seventy seven (77) staff who make up the three operational portfolio units of Supply Chain, Regulatory and Registry.

Supply Chain

In 2012, the Supply Chain continued its ongoing focus on optimizing its performance in the critical result areas of procurement of goods & services just in time, inventory management, as well as Fleet & Property Services.

The performance drivers for 2012 were based on the following key objectives:

• Increase Speed of delivery of goods & servicesrendered to internal & external customers

• Improve Quality of goods delivered & servicesrendered to internal & external customers and

• Reduce Costs of providing goods & services tointernal & external customers

The above key operational objectives were aligned to the Corporate Plan of achieving a 2.5% ROSF target set by the Government. Also associated with this objective is the Corporate Key Performance Indicator (KPI) requirement

FEA personnel working on overhead transmission line.

3130


for stockholding level which has a set target of not more than $13M.

Major Supply Chain outcomes achieved were:

A) Timely Tender Process & Procurement of goods & services

• theactualaverage tender turnaround timeof5.28weeks was accomplished for the year (for tenders valuedto>=$10kand<=$100k)againstatargetof 6 weeks.

• Inaddition,monetarysavingsofaround$1.5Mwereachieved via procurement/tender negotiations and other supply chain efficiency cost initiatives.

B) Sound Inventory Management & Best Practices

• Stock-turns KPI (Improvement of rate of stockUtilization) was achieved at 11.2% against a target of greater than 6%. This achievement indicates that FEA’s stock items have been managed using Just In Time (JIT) best practice methodology and that stock has been turned over regularly contributing to significant savings in FEA’s working capital/opportunity cost.

• FEA also achieved the inventory stockholding level KPI (excluding fuel & engine spares) of $12M, against a corporate target of $13M.

C) Fleet & Property Management

• At the end of 2012, the Authority embarked ona Proof of Concept project involving monitoring the movement of 5 of its 240 vehicle fleet. If the outcome of this exercise on 5 vehicles is proven to be successful in early 2013, then implementation for the remaining vehicles will commence thereafter.

• Although the Corporate Fleet Accidents KPI target was not achieved in 2012, i.e. actual accident count of 20 (FEA driver initiated) against a target of 9. The FEA Fleet team is committed to work with the Health & Safety team (HSE) to mitigate and reduce driving risks through specific driver attitude training including specialist vehicle training programmes to address the current weaknesses.

• All FEA properties Fiji wide were managed as perlaid down policies and procedures.

The FEA Team participated in the Fiji Day celebration march in Suva in October 2012.

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The FEA Team carrying out a clean-up exercise at Father Law Home in Lami. This was part of FEA’s corporate social responsibility program.

Regulatory Functions

The core function of the Regulatory unit is to facilitate regulation and compliance enforcement of the Electricity Act for all stakeholders in the Electricity sector. Its other functions include, but are not limited to the following:

• registrationandlicensingofelectricians&electricalcontractors;

• licensing of electrical generation equipment andretailers including licensing of new Independent Power Producers (IPPs);

• ensuring industry compliance, in accordance withthe Electricity Act and AS/NZS Electrical Wiring Standards;

• electrical testing of imported electrical appliancesand fittings used in Fiji upon request.

Major outcomes achieved by this Unit were:

A) Administration & Maintenance of Registers for Licensed Electricians & Electrical Contractor

• Total number of registered licensed electricianswere 1,752 whilst only 1,217 had valid licences;

• Total number of registered electrical contractorswere 269 whilst only188 had valid licences;

• The public were advised of the importance ofengaging only registered electrical contractors when carrying out any electrical wiring work on their premises. For the benefit of the public, the list of licensed electrical contractors was published six monthly in the Fiji Sun newspaper.

B) Number of new customer installations inspected and approved for connections

• A total of 4,626 new connections were made in2012 of which 4,027 were for domestic customers and 599 for commercial customers.

C) Ongoing and proactive Public Safety Awareness campaign

• Achievedtargetof4safetyawarenesspresentationsto various communities, villages & schools to ensure life and property are protected and remain safe.

33


The 40MW Nadarivatu Renewal Hydro Power Project was commissioned on 14th September 2012 and by the year end had generated 29.9M units of energy. The final project cost was US$140.7M against a budget of US$150M.

32


33

33


33

FOR THE YEAR ENDED 31 DECEMBER 2012

PAGE 34 STATEMENT BY MEMBERS OF THE AUTHORITY

PAGE 35 INDEPENDENT AUDIT REPORT

PAGE 36 STATEMENT OF COMPREHENSIVE INCOME

PAGE 37 STATEMENT OF FINANCIAL POSITION

PAGE 38 STATEMENT OF CASH FLOWS

PAGE 39 STATEMENT OF CHANGES IN CAPITAL AND RESERVES

PAGE 40 - 62 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FInanCIaLStateMentS


33

34

Fiji Electricity Authority | Financial Statements 2012

StateMent bY MeMberS oF tHe aUtHorItY for the Year Ended 31 December 2012

In accordance with a resolution of the Members of the Fiji Electricity Authority, in the opinion of the Members:

1. the financial statements and accompanying notes show a true and fair view of the financial position, results of operations, changes in capital and reserves and cash flows of the Fiji Electricity Authority as at and for the year ended 31 December 2012;

2. the statements have been prepared in accordance with the provisions of the Electricity Act 1966 (Cap 180) and International Financial Reporting Standards;

3. the basis of preparation of the financial statements and the classification and carrying amounts of assets and liabilities as stated in these financial statements are appropriate;

4. at the date of the statement there are reasonable grounds to believe that the Authority will be able to pay its debts as when they fall due; and

5. all related party transactions have been adequately recorded in the books of the Authority.

Dated at Suva this 15th day of May 2013.

Nizam-ud-Dean Gardiner Whiteside CHAIRMAN DEPUTY CHAIRMAN

3534

Fiji Electricity Authority | Financial Statements 2012 Financial Statements 2012 | Fij i Electricity Authority

InDepenDent aUDIt reportfor the Year Ended 31 December 2012

I have audited the accompanying financial statements of Fiji Electricity Authority (Authority), which comprise the statement of financial position as at 31 December 2012, the statement of comprehensive income, statement of changes in capital and reserves and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 36 to 62.

Directors’ and Management’s Responsibility for the Financial Statements

Directors’ and management are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Electricity Act 1966. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

My responsibility is to express an opinion on these financial statements based on my audit. I have conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

I believe that the audit evidence that I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Audit Opinion

In my opinion:

a) proper books of account have been kept by the Fiji Electricity Authority, so far as it appears from my examination of those books; and

b) the accompanying financial statements which have been prepared in accordance with International Financial Reporting Standards:

(i) are in agreement with the books of accounts;

(ii) to the best of my information and according to the explanations given to me:

a) give a true and fair view of the state of affairs of the Fiji Electricity Authority as at 31 December 2012 and of the results, movement in reserves and cash flows of the Authority for the year ended on that date; and

b) give the information required by the Electricity Act 1966 (Cap 180) in the manner so required.

I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purposes of the audit.

Suva, Fiji Tevita Bolanavanua 15th May 2013 AUDITOR GENERAL

36


StateMent oF CoMpreHenSIve InCoMe for the Year Ended 31 December 2012

Notes 2012 2011 $’000 $’000

Revenue - electricity sales 5 290,451 288,778 Other operating revenue 5 5,852 16,766

Total revenue 296,303 305,544

Personnel costs (17,377) (17,941) Fuel costs (105,136) (137,881)Electricity purchases (10,045) (14,401) Lease and rent expenses (1,375) (1,830) Depreciation on property, plant and equipment (34,522) (29,914) Amortisation of intangible assets (522) (524) Cyclone Evan - Restoration costs (5,013) - Losses due to flooding (1,314) - Other operating expenses (42,788) (39,584)

Total expenses (218,092) (242,075)

Profit before finance costs and income tax 78,211 63,469

Finance Cost:

Finance cost (18,649) (12,054)Interest income 242 741 Unrealised foreign exchange gain, net 2,032 271

Profit before income tax 6 61,836 52,427

Income tax benefit/(expense) 7(a) 13,509 (517)

Profit after income tax 75,345 51,910

Other comprehensive income - -

Total comprehensive income for the year 75,345 51,910

The above statement of comprehensive income has been prepared in accordance with the International Financial Reporting Standards (IFRS) and should be read in conjunction with the accompanying notes.

3736


StateMent oF FInanCIaL poSItIon as at 31 December 2012

Notes 2012 2011 $’000 $’000

CAPITAL AND RESERvES Retained Profts 478,756 403,411Capital contribution 73,138 68,641

551,894 472,052

CURRENT ASSETS

Cash on hand and at bank 8 28,781 3,640 Held to maturity financial assets 12 11,883 23,409 Receivables and prepayments 9 33,732 42,888 Inventories 10 18,454 18,072 Tax refund due 6,197 -

99,047 88,009

NON-CURRENT ASSETS

Property, plant and equipment 11 912,929 890,722 Intangible assets 13(b) 1,786 2,262 Deferred tax assets 7(b) 17,720 2,017

932,435 895,001

TOTAL ASSETS 1,031,482 983,010

CURRENT LIABILITIES

Trade and other payables 14 40,851 43,407 Provision for employee entitlements 15 2,355 6,584 Interest bearing borrowings 16 35,778 36,661 Income tax payable - 4,535

78,984 91,187

NON-CURRENT LIABILITIES

Trade and other payables 14 55,573 49,679 Interest bearing borrowings 16 293,000 322,624 Deferred income 17 9,850 10,706 Deferred tax liabilities 7(c) 42,181 36,762 400,604 419,771

TOTAL LIABILITIES 479,588 510,958

NET ASSETS 551,894 472,052

The above statement of financial position has been prepared in accordance with the International Financial Reporting Standards (IFRS) and should be read in conjunction with the accompanying notes.

38


StateMent oF CaSH FLoWS for the Year Ended 31 December 2012

Note 2012 2011 $’000 $’000

Cash flows from operating activities

Receipts from customers 299,427 294,681 Payments to suppliers and employees (195,458) (235,388) Interest received 247 770 Interest paid (24,554) (24,069) Insurance proceeds for business interruption 8,037 3,756 Net income tax and withholding taxes paid (7,507) (3,246)

Net cash flows from operating activities 80,192 36,504 Cash flows from investing activities Acquisition of property, plant and equipment (37,991) (79,289) Acquisition of intangible assets (46) (284) Net redemption from held to maturity financial assets 11,309 32,457 Proceeds from capital contribution for rural electrification, net 4,560 5,442 Repayments from refundable contribution for general extension, (net) (4,961) (125) Proceeds from disposal of plant and equipment 288 226

Net cash flows used in investing activities (26,841) (41,573) Cash flows from financing activities Repayment of bonds and loans (41,342) (17,039) Proceeds from bonds and loans - local 13,042 25,500

Net cash flows (used in)/from financing activities (28,300) 8,461

Net increase in cash held 25,051 3,392

Effect of exchange rate movement on cash and cash equivalents 90 298 Transfer of Sustainable Energy Limited cash balance - 226 Cash and cash equivalents - at the beginning of the year 3,640 (276)

Cash and cash equivalents - at the end of the year 8 28,781 3,640

The above statement of cash flows has been prepared in accordance with the International Financial Reporting Standards (IFRS) and should be read in conjunction with the accompanying notes.

3938


StateMent oF CHanGeS In CapItaL anD reServeS for the Year Ended 31 December 2012

Capital Retained Contributions Profits Total $’000 $’000 $’000

Balance as at 31 December 2010 63,199 351,501 414,700

Movement in reserves 5,442 - 5,442

Total comprehensive income for the year ended 31 December 2011 - 51,910 51,910


Movement in reserves 4,497 - 4,497

Total comprehensive income for the year ended 31 December 2012 - 75,345 75,345


The above statement of changes in capital and reserves has been prepared in accordance with the International Financial Reporting Standards (IFRS) and should be read in conjunction with the accompanying notes.

40


noteS to anD ForMInG part oF tHe FInanCIaL StateMentS for the Year Ended 31 December 2012

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The financial statements have been prepared in accordance with the Electricity Act 1966 (Cap 180) and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (IASB).

Issue of Financial Statements

The financial statements were approved for issue by the Authority’s Board of Directors at its meeting held on 24th April 2013.

Basis of Preparation

The financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets.

In the application of IFRS, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

Standards, amendments and interpretations issued but not yet effective

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the accounting periods beginning on or after 1 January 2013 or later periods, but the Authority has not early adopted them. No significant impact is expected to arise out of these standards, amendments and interpretations.

• IFRS9(Amendment),‘FinancialInstruments-Classificationandmeasurement’.(1January2013)

• IAS12(Amendment)‘IncomeTaxes-Deferredtax’.(1January2013)

• IFRS13‘DisclosuresofFairValueMeasurement’.(1January2013)

• IAS19(Amendment),‘EmployeeBenefits’.(1January2013)

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

The following significant accounting policies have been adopted in the preparation and presentation of the financial statements:

(a) Allowance for doubtful debts

The Authority establishes an allowance for any doubtful debts based on a review of all outstanding amounts at year-end. Bad debts are written off during the period in which they are identified.

(b) Bond instruments

The bonds issued are recorded at cost which reflects the face value of these instruments.Transaction costs on the issue of bond instruments are capitalised and amortised to the statement of comprehensive income over the currency life of the bond instruments. Transaction costs are the costs that are incurred directly in connection with the issue of those bond instruments and which would not have been incurred had those instruments not been issued.

(c) Borrowings

Borrowings are recognized 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 statement of comprehensive income over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Authority has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(d) Borrowing costs

The borrowing costs that are directly attributable to major capital expenditures and projects under construction are capitalized as part of the cost of these assets. Other borrowing costs are recognized as an expense in the year in which they are incurred.

The government guarantee fees on loans drawdown specifically for capital projects are capitalised. Other guarantee fees paid are expensed.

(e) Capital contribution

A 100% refundable capital contribution represents the cost of the extension, received from the developer or a prospective consumer. The cost of the extension is the estimated cost incurred from the Authority’s nearest mains supply point capable of providing the assessed load required. The developer or a prospective consumer applying for a general extension provides a 100% refundable capital contribution in relation to the cost of the extension which is credited to trade and other payables and is refunded to the customer over a period of 5 and 8 years. This is in accordance with the determination by the Fiji Commerce Commission.

(f) Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand, short term deposits held with banks and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities in the Statement of Financial Position.

(g) Comparative figures

Where necessary, amounts relating to prior years have been reclassified to facilitate comparison and achieve consistency in disclosure with current year amounts.

(h) Deferred income

Government grant in aid and assets acquired at no cost to the Authority are capitalised and systematically recognised as other income on the basis of the expected lives of the assets to which the grants relate.

42




(i) Employee benefits

i) Annual leave

The provision for annual leave represents the amount which the Authority has a present obligation to pay for employees’ services provided up to the balance date. The provision has been calculated on the current wage and salary rate.

ii) Long service leave

The liability is determined by the conditions of employment, employees’ services provided up to the balance date and is calculated on the current wage and salary rate.

iii) Retirement benefit

The liability is determined by the conditions of employment, employees’ services provided up to the balance date and is calculated on the current wage and salary rate.

With the implementation of the Essential National Industries Decree, with effect from 7th November 2011, all the Long Service Leave and Retirement Benefit Entitlements for employees have ceased. The benefits accrued up to 7th November 2011 were fully settled to the employees in 2012.

iv) Perfomance pay

The Authority maintains a Perfomance Management System which is used to remunerate employees based on the achievement of some Key Perfomance Indicators (KPIs). These KPIs are established based on predetermined objectives of the Authority. The liability is measured at the wage or salary rates prevailing at year end.

(j) Foreign currency translation

Transactions denominated in a foreign currency are translated to Fiji currency at the exchange rate at the date of the transaction.

Foreign currency receivables and payables at balance date are translated to Fiji currency at exchange rates current at balance date.

All gains and losses arising there-from (realised and unrealised) are brought to account in determining the profit or loss for the year.

(k) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average cost principle and includes expenditure incurred in acquiring the stock and bringing it to its existing condition and location. Consumables are valued at cost plus the associated delivery charges.

(l) Impairment of assets

At each balance sheet date, the Authority reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Authority estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

4342




(m) Intangible assets

a) Investments in movie productions

Investment in movie productions have been valued at cost and reduced by an impairment charge to arrive at a carrying amount the Authority expects to recover from the exploitation of the copyright in accordance with the Production Investment Agreement.

b) Computer software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to five years).

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Authority, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.

(n) Leased assets

Fiji Electricity Authority, the Monasavu landowners and the iTaukei Land Trust Board (iTLTB) have in 2005 signed an agreement to lease approximately 23,000 acres of the Monasavu catchment area for a period of 99 years in return for specified payments. These lease committments are disclosed under note 19 to the financial statements.

(o) Payables

Trade payables and other accounts payable are recognised when the Authority becomes obliged to make future payments resulting from the purchase of goods and services.

(p) Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the item. Cost of leasehold land includes initial premium payment or price paid to acquire leasehold land including acquisition costs.

Additions

While expenditure on assets with a value of less than $1,000 is generally not capitalised, physical control is maintained over all items regardless of cost.

44




(p) Property, plant and equipment (Cont’d)

Depreciation rates

Depreciation is calculated on the straight line method to write off the cost of each asset over their estimated useful lives as follows:

Rates

Leasehold land 0.50% - 1.25%

Buildings - Concrete 1.25%

Buildings - Others 1.25%

Hydro Assets - Dams 1.33% - 2.50%

Hydro Assets - Tunnels 1.33% - 2.44%

Hydro Assets - Plant and Machinery 2.50% - 3.00%

Thermal assets 4.00% - 7.00%

Transmission 2.50%

Communication system & control 2.86%

Reticulation 4.00%

Wind Mill 5.00%

Furniture & fittings 7.00% - 24.00%

Motor vehicles 20.00%

Computers 33.30%

Other fixed assets except for capital spares, are depreciated when they are brought into service.

Freehold land is not depreciated. Leasehold land is amortised over the remaining lease period.

Capital spares

Capital spares represent items held primarily for use in thermal stations in the event of a breakdown. In recognition of the increased risk of obsolescence over a protracted period, capital spares are amortised in line with the depreciation rates applicable to the related plant and machinery. Capital spares are reported as part of Authority’s fixed assets.

Disposals

Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the statement of comprehensive income.

Repairs and maintenance

Repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Authority. Major renovations are depreciated over the remaining useful life of the related asset.

4544




(q) Provisions

Provisions are recognised:

- When the Authority has a present legal or constructive obligation as a result of past events;

- It is probable that an outflow of resources will be required to settle the obligation; and

- The amount can be reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

(r) Reporting currency

All figures are reported in Fiji currency.

(s) Revenue recognition

Electricity income

Electricity income is recorded in the statement of comprehensive income on an accrual basis by estimating the usage for customers to balance date.

Other income

Rental income earned from leasing FEA properties is recorded in the statement of comprehensive income on an accrual basis.

Interest income is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(t) Rounding off amounts

Amounts in the financial statements have been rounded off to the nearest thousand dollars unless specifically stated to be otherwise.

46




(u) Taxation

Current tax:

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the year. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior years is recognised as a liability or asset to the extent that it is unpaid or refundable.

Deferred tax:

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods when the asset and liability giving rise to them are realised or settled, based on tax rates and tax laws that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Authority expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Authority intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period:

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

(v) Segment information

The Authority is not required to report segment information as it is not applicable to the nature of the Authority’s operations. Whilst electricity revenue is distinguished by key operating segments, this is done purely for information purposes. The Authority has only one product in electricity, and costs associated with this product are totally common to all operating segments, and it is not possible nor practical to attempt to allocate costs across the operating segments. The Authority’s power generating system and distribution are operated on a fully integrated basis.

(w) value Added Tax (vAT)

Revenues, expenses, assets and liabilities are recognised net of the amount of value added tax (VAT), except:

i) Where the amount of VAT incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

ii) for trade receivables and trade payables which are recognised inclusive of VAT.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

4746



2. FINANCIAL RISK MANAGEMENT

2.1 Financial risk factors

The Authority’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Authority’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Authority’s financial performance. The Authority does not enter into or trade financial instruments, including derivative finan-cial instruments, for speculative purposes. The Authority’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.

(a) Market risk

(i) Foreign exchange risk

The Authority undertakes various transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are closely managed within approved policy parameters.

As at year end, US$10.08M are the only assets denominated in foreign currencies. Hence, changes in the US dollars by 10% (increase or decrease) is expected to have significant impact on the net profit and equity bal-ances currently reflected in the Authority’s financial statements.

Average Financial Assets exchange rate Financial Assets (US$’000) Rate (USD) (F$’000)

31 December 2012 (Actual) US$10,080 0.5595 18,016

Exchange rates - strengthen by 10% US$10,080 0.6155 16,377

Exchange rates - weaken by 10% US$10,080 0.5036 20,016

Based on the above, if average exchange rates strengthen by 10% the Authority’s investments in financial assets

would decrease by $1.64M and if the average exchange rates weaken by 10% the Authority’s investments in financial assets would increase by $2M.

However, a risk arises on the Authority’s obligation with respect to the foreign currency loan of US$64.17million (2011: US$70M) which remains outstanding as at year end. For the year ended 31 December 2012, the restate-ment of the Authority’s foreign currency loans has resulted in an unrealised foreign currency gain of $2.13M, net. Further sensitivities are provided to establish the impact to the profit before tax if foreign currency exchange rate differs by 10% (increase or decrease) from that used at balance date:

Foreign currency Average Foreign currency borrowings exchange rate borrowings (US$’000) Rate (USD) (F$000)

31 December 2012 (Actual) US$64,167 0.5595 114,686

Exchange rates - strengthen by 10% US$64,167 0.6155 104,252

Exchange rates - weaken by 10% US$64,167 0.5036 127,417

Based on the above, if average exchange rates strengthen by 10% the Authority’s foreign currency borrowings would decrease by $10.44M and if the average exchange rates weaken by 10% the Authority’s foreign currency borrowings would increase by $12.73M. The Authority has tendered to refinance US$30M of the above loan balance locally in Fijian Dollars. This will reduce the impact of any foreign currency fluctuation attached to the above foreign currency loan.

48



2. FINANCIAL RISK MANAGEMENT (CONT’D)

2.1 Financial risk factors (Cont’d)

(a) Market risk (Cont’d)

(i) Foreign exchange risk (Cont’d)

As at balance date, the Authority has paid US$112.4M of the total contract amount of US$124.8M to Sinohydro Corporation Limited for the construction of the Nadarivatu Renewable Hydro Project. Therefore, changes in the US dollars by 10% (increase/decrease) will not have significant impact on the cost of the Nadarivatu Renewable Hydro Project.

The Authority enters into forward foreign exchange contracts on a selective basis to manage its exposure to foreign exchange rate risk.

Forward exchange contracts are initially recognised at fair value on the date a derivative contract is entered into and are subsequently restated to their fair value at each reporting date. These forward exchange contracts do not qualify for hedge accounting. However, there were no outstanding forward foreign exchange contracts as at 31 December 2012.

(ii) Price risk

The Authority does not have investments in equity securities and hence is not exposed to equity securities price risk. However, the Authority is exposed to commodity price risk in the form of fuel purchased through a local agent from offshore. The volatility on international fuel prices and its impact on FEA’s profitability is given below considering two scenarios based on price, quantity mix, demand growth and hydro availability:

Average Fuel Price Consumption Fuel costs (F$/Metric Tonne) (Metric Tonne) $’000

31 December 2012 (Actual) 1,782.10 58,996 105,136

Fuel price-Increase by 10% 1,960.30 58,996 115,650

Fuel Price-Decrease by 10% 1,603.89 58,996 94,622

Based on the above, if fuel price increase or decrease by 10%, the fuel costs to the Authority would increase or decrease by $10.5M annually. The above sensitivity calculation is based on the 2012 fuel consumption levels.

(iii) Regulatory risk

The Authority’s profitability can be significantly impacted by regulatory agencies established which govern and control the electricity sector in Fiji. Specifically, fuel surcharges, regulatory fees and electricity tariffs are regulated by the Fiji Commerce Commission.

(iv) Interest rate risk

The Authority has significant interest-bearing assets in the form of short-term cash deposits. These are at fixed interest rates and hence there are no interest rate risks during the period of investment. For re-investment of short and long term cash deposits, the Authority negotiates an appropriate interest rate with the banks and invests with the bank which offers the highest interest return.

Given the fixed nature of interest rates described above, the Authority has a high level of certainty over the im-pact on cash flows arising from interest income. Accordingly, the Authority does not require simulations to be performed over impact on net profits arising from changes in interest rates.

All debts of the Authority raised through bond issues bear fixed interest rates. Therefore, the Authority is not exposed to interest rate risk.

In relation to the borrowings from Suva City Council, the Authority is not exposed to interest rate risk as it bor-rows funds at fixed interest rates.

4948



2. FINANCIAL RISK MANAGEMENT (CONT’D)

2.1 Financial risk factors (Cont’d)

(a) Market risk (Cont’d)

(iv) Interest rate risk (Cont’d)

In relation to the borrowings from other commercial banks, the Authority to certain extent is not exposed to in-terest rate risk as certain borrowed funds are at fixed interest rates, for the agreed term. Thereafter, the interest rates are re-negotiated and new interest rates are agreed upon. The risk is managed closely within the approved policy parameters.

The Authority did not enter into any interest swap contracts.

(b) Credit risk

Credit risk arises from deposits with banks, as well as credit exposures to customers, including outstanding receivables. For deposits with banks, only reputable parties with known sound financial standing are accepted. Trade accounts receivable consist of a large number of customers, residential, industrial and commercial. The Authority does not have any significant credit risk exposure to any single counterparty or any group of coun-terparties having similar characteristics. The carrying amount of financial assets recorded in the financial state-ments, net of any allowances for losses, represents the Authority’s maximum exposure to credit risk.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash to ensure availability of funding. The Au-thority monitors liquidity through rolling forecasts of the Authority’s cash flow position. Overall, the Authority does not see liquidity risk as high given that a reasonable portion of revenues are billed and collected.

The table below analyses the Authority’s financial assets and liabilities into relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are based on the contractual undiscounted cash flows.

Fair value estimation

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The carrying values of financial liabilities and financial assets and provisions are estimated to approximate their fair values.

Financial assets: Less than 2 to 5 years More than Total one year 5 years $’000 $’000 $’000 $’000

Held to maturity financial assets 11,883 - - 11,883

Receivables and prepayments 33,732 - - 33,732

Total 45,615 - - 45,615

Financial Liabilities:

Trade and other payables 40,851 19,924 35,649 96,424

Bonds payable 15,500 26,250 49,250 91,000

Interest bearing borrowings 20,278 78,771 138,729 237,778

Total 76,629 124,945 223,628 425,202

50



3 CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS AND ASSUMPTIONS

Estimates and assumptions 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 Authority 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 amounts of assets and liabilities within the next financial year are discussed below.

(a) Impairment of property, plant and equipment

The Authority assesses whether there are any indicators of impairment for all property, plant and equipment at each reporting date. Property, plant and equipment are tested for impairment and when there are indicators that the carrying amount may not be recoverable, reasonable provision for impairment are created. As at balance date, no provision for impairment has been made as the Authority reasonably believes that no indicators for impairment exist.

(b) Impairment of accounts receivable

Impairment of accounts receivable balances is assessed at an individual level and impairment tests are per-formed on a more specific basis. All receivable balances relating to the closed customer accounts are estimated to have been impaired and are accordingly provided for.

(c) Deferred tax assets

Deferred tax assets are recognized for all unused tax losses to the extent that taxable profits will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely level of future taxable profits together with future planning strategies.

(d) Provision for stock obsolescence

Provision for stock obsolescence is assessed and raised on a specific basis based on a review of inventories. Inventories considered obsolete or un-serviceable are written off in the year in which they are identified.

(e) Customer security deposits

The customer security deposits are classified as current and non current based on the Authority’s past experi-ence with the refund of the deposit to customers.

4 CAPITAL RISK MANAGEMENT

The Authority’s objectives when managing capital are to safeguard the Authority’s ability to continue as a going concern in order to provide returns and benefits for stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Authority monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the statement of financial position) less cash and cash equivalents and short term deposits. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt.

The gearing ratios at 31 December 2012 and 2011 were as follows:

2012 2011 $’000 $’000

Total borrowings (Note 16) 328,778 359,285

Less: Held to maturity financial assets (Note 12) (11,883) (23,409)

Less: Cash on hand and at bank (28,781) (3,640)

Net debt 288,114 332,236

Total capital and reserves 551,894 472,052

Total capital (total capital and reserves plus net debt) 840,008 804,288

Gearing ratio (net debt / total capital and reserves x 100) 34.30% 41.31%

The movement in the gearing ratio during 2012 resulted primarily from the net repayments of borrowings of $41.3M and the increase in capital and reserves as a result of the significant profit recorded during the year.

5150



5. OPERATING REvENUE 2012 2011 $’000 $’000

ELECTRICITY SALES

Commercial 138,831 137,733 Industrial 74,303 71,399 Domestic 70,458 72,340 Others 6,859 7,306

Total electricity sales 290,451 288,778

OTHER OPERATING REvENUE

Bad debts recovered 28 18 Business interruption insurance claims received 874 10,919 Contract sales 1,555 1,014 Deferred income 856 857 Freight refund - 452 Gain on disposal of plant and equipment 229 220 Lease rental - fibre optic 149 149 Power pole rentals 682 663 Rentals 34 38 Realised exchange gain, net 639 1,663 Sales and commissions 202 205 Service and licence fees 536 518 Training rebates 68 50

Total other operating revenue 5,852 16,766

Total revenue 296,303 305,544

6. PROFIT BEFORE INCOME TAX

Profit before income tax has been determined after charging the following expenses:

Allowance / (amounts recovered) for doubtful debts 98 (30) Auditors’ remuneration for auditing services 22 21 Bad debts written off 31 139 Professional fees for other services 343 398 Directors’ fees 52 48 Depreciation on property, plant and equipment 34,522 29,914 Amortisation of intangible assets 522 524 Government guarantee fees 499 418 Insurance 6,147 4,309 Personnel costs 17,377 17,941 Unrealised foreign exchange loss 217 70

52



7. a) INCOME TAX (BENEFIT)/ EXPENSE 2012 2011 $’000 $’000

The prima facie income tax on the pre-tax profit reconciles to the income tax (benefit) / expense as follows:

Profit before income tax 61,836 52,427 Prima facie income tax payable at 20% (2011-28%) 12,367 14,680 Tax effect of amounts which are not taxable in

calculating taxable income: - Employee taxation scheme (13) (19) - Deferred income (171) (240) - Fuel Economy Investment Allowance (24,770) - Effect of change in tax rate - (13,898) Over-provision in prior year (922) (6)

Income tax (benefit) / expense attributable to profit (13,509) 517

b) DEFERRED TAX ASSET

The deferred tax assets consist of the following at future tax rates:

Tax losses 16,536 - Provision for employee benefits - 897 Provision for doubtful debts 62 42 Unrealised exchange losses 1,122 1,078

17,720 2,017

c) DEFERRED TAX LIABILITY

The deferred tax liabilities consist of the following taxable temporary differences at future tax rates:

Property, Plant & Equipment 40,156 35,187 Unrealised exchange gain 2,025 1,575

42,181 36,762

Income tax (benefit) / expense comprises movements in:

Deferred tax assets (15,704) 6,817 Deferred tax liabilities 5,420 (14,411) Current tax liability / provision for income tax (3,225) 8,111

(13,509) 517

8. CASH AND CASH EQUIvALENTS

Short term deposits 20,000 2,004 Cash at bank and on hand 8,781 1,636

Total cash and cash equivalents 28,781 3,640

9. RECEIvABLES AND PREPAYMENTS

Electricity debtors 29,007 32,014 Other debtors 1,060 7,573 VAT receivable - 620 Prepayments and deposits 3,975 2,893

34,042 43,100

5352


noteS to anD ForMInG part oF tHe FInanCIaL StateMentSfor the Year Ended 31 December 2012

9. RECEIvABLES AND PREPAYMENTS (CONT’D) 2012 2011 $’000 $’000

Allowance for doubtful debts

- Electricity debtors (277) (178)

- Other debtors (33) (34)

Total receivables and prepayments net 33,732 42,888

The terms of trade for electricity debtors are 14 days from the date of billing.

Electricity debtors that are less than 3 months past due are not considered impaired. As at 31 December 2012, electricity debtors of $24,478,466 (2011: $24,868,896) were not considered impaired.

As of 31 December 2012, the amount of electricity debtors impaired was $276,609 (2011: $178,216) net off de-posits held. The individual receivables are mainly customers, who have defaulted in payments. It was assessed that a portion of the receivables are expected to be recovered.

Movements in the provision for impairment of electricity debtors and other debtors are as follows:

Balance as at 1 January 212 242

Amounts allowed/(recovered) during the year 98 (30)

Balance as at 31 December 310 212

The creation and releasing of provision for impaired receivables has been included in “Other operating expenses” in the statement of comprehensive income (Note 6). Amounts charged to the allowance account are generally written off, when there is no expectation of recovering the debt.

The other classes within receivables and prepayments do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each classes of receivables men-tioned above less electricity deposits. The Authority generally obtains security deposits in the form of bank guarantees and cash deposits from all electricity customers which is estimated based on two months electricity consumptions. The total carrying amount of security deposits in relation to the above trade receivables carried by the Authority is $34,248,056 (2011: $23,703,004). The rest are secured through bank guarantees maintained by the Authority. A portion of this security deposit is refunded to customers on daily basis.

10. INvENTORIES

Consumables - at cost 18,044 17,638

Goods in transit 410 434

Total inventories 18,454 18,072

11. PROPERTY, PLANT AND EQUIPMENT

Freehold land At cost 28,635 28,635

Leasehold land At cost 13,866 13,488 Accumulated depreciation (1,467) (1,324)

12,399 12,164

Buildings and improvements At cost 82,114 74,754 Accumulated depreciation (15,114) (14,074)

67,000 60,680

54


noteS to anD ForMInG part oF tHe FInanCIaL StateMentSfor the Year Ended 31 December 2012

11. PROPERTY, PLANT AND EQUIPMENT (CONT’D) 2012 2011 $’000 $’000

Dam, tunnels, water conductor At cost 495,960 186,335 Accumulated depreciation (37,485) (29,981)

458,475 156,354

Plant, equipment and transmission assets At cost 433,059 406,587 Accumulated depreciation (150,215) (129,591)

282,844 276,996

Furniture and fittings At cost 22,595 21,621 Accumulated depreciation (13,669) (12,615)

8,926 9,006

Wind mill At cost 34,393 34,394 Accumulated depreciation (9,358) (7,612)

25,035 26,782

Motor vehicles At cost 17,276 16,006 Accumulated depreciation (12,803) (11,271)

4,473 4,735

Capital spares At cost 4,938 4,571

Capital works in progress

- Nadarivatu Renewable Hydro Power Project - 287,478 - Wainisavulevu Weir Raising Project 9,569 - - Rural and Urban Reticulation Project 1,342 3,306 - Turnkey Project - 6,381 - Others 9,293 13,634

20,204 310,799

Total

- At cost 1,153,040 1,097,190 - Accumulated depreciation (240,111) (206,468)

Closing net book value 912,929 890,722

54


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61,643 160,938

239,529 8,497

29,322 5,438

3,775 270,944

809,081

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isposals -

- -

- -

- -

(6) (367)

- (373)

Transfers 11,829

118 9

19 56,498

1,513 (748)

1,481 (194)

(70,525) -

Depreciation charge

- (143)

(972) (4,603)

(19,031) (1,004)

(1,792) (2,178)

(191) -

(29,914)

Balance as at 31

D

ecemb

er 2011 28,635

12,164 60,680

156,354 276,996

9,006 26,782

4,735 4,571

310,799 890,722

Additions

- -

- -

- -

- -

1,678 55,257

56,935 D

isposals -

- -

- -

- -

(59) (147)

- (206)

Transfers -

379 7,359

309,625 26,472

975 -

1,957 (915)

(345,852) -

Depreciation charge

- (144)

(1,039) (7,504)

(20,624) (1,055)

(1,747) (2,160)

(249) -

(34,522)

Balance as at 31

D

ecemb

er 2012 28,635

12,399 67,000

458,475 282,844

8,926 25,035

4,473 4,938

20,204 912,929

D

uring the year, borrowing costs of $5,260,516 net of interest incom

e of $67,185 were capitalised to the cost of the N

adarivatu Renew

able Hydro P

ower P

roject and the Wainisavulevu W

eir raising project.

Land title in respect of the Authority’s acquistion of land at K

inoya was legally transferred to the A

uthority in January 2012.

Agreem

ent for the Monasavu lease has been prepared and lease titles w

ill be formally executed and issued once the land survey is com

pleted. It is envisaged that this will be finalised in

2013.

55

Fin

an

cial S

tate

me

nts 2

012

| Fiji E

lectricity

Au

tho

rity

56



12. FINANCIAL ASSETS 2012 2011 $’000 $’000

Held-to-maturity financial assets

Short term deposits with banks 11,883 23,409 During the year, the Authority reinvested US$ 6.65M as term deposits with ANZ bank at an interest rate of

1.05% per annum. This term deposit will be used to repay the balance of the Sinohydro Corporation offshore contract in US dollars for the construction of Nadarivatu Renewable Hydro Power Project.

13. INTANGIBLE ASSETS

a) Movie production

Gross carrying amount: Balance as at 1 January 1,614 1,614

Additions - - Disposal - - Balance as at 31 December 1,614 1,614

Accumulated impairment allowance:

Balance as at 1 January 1,614 1,614 Impairment allowance - - Disposal - -

Balance as at 31 December 1,614 1,614

Net book amount - - Investment in movie production comprises of investment in “Pirate Islands 2” movie project. The movie project

has been granted F1 Provisional Certificate by the Fiji Audio Visual Commission and thereby incentive by way of 150% tax deduction is available. The investment has been valued at cost and reduced by an impairment charge to arrive at a carrying amount which is an amount the Authority expects to recover from the exploitation of the copyright in accordance with the Production Investment Agreement.

5756



13. INTANGIBLE ASSETS (CONT’D) 2012 2011 $’000 $’000

b) Software License

Gross carrying amount:

Balance as at 1 January 6,444 6,160

Additions 46 284

Balance as at 31 December 6,490 6,444

Accumulated amortisation:

Balance as at 1 January (4,182) (3,658)

Amortisation for the year (522) (524)

Balance as at 31 December (4,704) (4,182)

Net book amount 1,786 2,262

Software license are made up of the Authority’s Financial Management Information System, Billing System and other specialized Energy Monitoring Information System. The software license has been valued at cost and amortised by an impairment charge over its remaining life to arrive at the carrying amounts.

14. TRADE AND OTHER PAYABLES

Current

Trade creditors 1,517 16,411 Other creditors and accruals 31,987 20,475 VAT payable 1,082 - Accrued interest 4,369 4,625 Customer security deposits 1,896 1,896

Total current trade and other payables 40,851 43,407

Non-Current Other creditors and accruals 12,338 12,106 Customer security deposits 32,352 21,807 General Extension refundable deposits 10,883 15,766

Total non-current trade and other payables 55,573 49,679

The fair value of trade and other payables equals their carrying amount, as the impact of discounting is not significant. The customer security deposits relates to the mandatory cash deposit which is equivalent to two months electricity consumptions in accordance with the Elelctricity Act. This is refunded to the customer when the electricity account is permanently closed. The general extension refundable deposits are the capital contribution from prospective customers or developer for the supply of electricity from FEA’s nearest grid in accordance with the General Extension Policy. The amount is refunded to the customer over a period of 5 and 8 years.

58



15. PROvISION FOR EMPLOYEE ENTITLEMENTS 2012 2011 $’000 $’000

Perfomance pay 1,472 1,130 Annual leave 883 969 Long service leave - 1,049 Retirement benefits - 3,436

Total provision for employee entitlements 2,355 6,584

Balance as at 1 January 6,584 6,380 Additional provisions (utilised)/recognised during the year (net) (4,229) 204

Carrying Amount as at 31 December 2,355 6,584

During the year 2012, the Authority paid off all the entitlements to the employees in respect of Long Service leave and Retirement Benefit to comply with the requirements of the Essential National Industries Decree.

Employee numbers 2012 2011

Number of full-time equivalent employees as at 31 December 703 661

16. INTEREST BEARING BORROWINGS 2012 2011 $’000 $’000

Current

Bonds (a) 15,500 22,000 Term loans - ANZ Bank (b) 5,810 - Term loans - BSP ( c) 4,000 4,000 Term loan - Suva City Council (d) 42 41 Term Loans - CDB (e) 10,426 10,620

Total current interest bearing borrowings 35,778 36,661

Non-Current Bonds (a) 75,500 91,000 Term loans - ANZ Bank (b) 96,007 93,534 Term loans - BSP ( c) 12,000 16,000 Term loan - Suva City Council (d) 5,233 5,275 Term Loans - CDB (e) 104,260 116,815

Total non-current interest bearing borrowings 293,000 322,624

Total interest bearing borrowings 328,778 359,285

(a) Bonds

The Reserve Bank of Fiji offers, manages and carries out registry services on behalf of the Authority. The Authority’s bonds are issued in competitive tenders. The bonds are recorded at cost which reflects the face value of the bonds. Bonds worth $22M were repaid during the year.

The maturing terms of the bonds range from 1 to 11 years, whilst the interest rates vary from 4.25% to 7.19% per annum. The bonds are guaranteed by the Government of Fiji.

5958



16. INTEREST BEARING BORROWINGS (CONT’D)

(b) Term loans - ANZ Bank

The interest rates for ANZ Bank term loans range from 4.0% to 5.2% per annum. The Authority sucessfully negotiated the rollover of the two FJD$20M loans during the year. The Principal Repayment for the two rollover loans also commenced in 2012.

The term loans from ANZ Bank are secured by the guarantee given by the Government of Fiji.

(c) Term loan - BSP

The term loan of $16M from Bank of South Pacific (BSP) is subject to interest at the rate of 4.0% per annum and is secured by a Guarantee given by the Government of Fiji.

(d) Term loan - Suva City Council

The term loan from Suva City Council (SCC) is subject to interest at the rate of 3% per annum and is unsecured. The loan principal and interest is repayable over a period of 86 years in equal instalments of $200,000 on 25th July each year until July 2065.

(e) Term loan - China Development Bank (CDB)

The term loan from CDB is subject to interest rate of 7.15% per annum for 60 months from the date of agreement and after 60 months the rate would be LIBOR rate plus a margin of 3.2% per annum. The loan is repayable over a period of 12 years in 24 equal semi-annual instalments. During the year the Authority made the first two loan repayments in accordance with the Loan Agreement.

The term loan is secured by a guarantee given by the Ministry of Finance on behalf of the Government of Fiji.

17. DEFERRED INCOME 2012 2011

$’000 $’000

EEC Grant In Aid

EEC Grant in Aid 12,330 12,330

Less: accumulated amortisation (6,777) (6,295)

Closing balance - 31 December 5,553 6,035

Government Grant For Rural Electrification

Government Grant for Rural Electrification 9,342 9,342

Less: accumulated amortisation (5,045) (4,671)

Closing balance - 31 December 4,297 4,671

Total deferred income, net 9,850 10,706

60



18. CONTINGENT LIABILITIES

(a) Miscellaneous claims

No provision has been recorded in the accounts for unsecured contingent liabilities mainly in respect of sundry court actions against the Authority. The Authority estimates such liability, if any, to be immaterial.

(b ) Contingent liabilities exist with respect to the following: 2012 2011 $’000 $’000

Letter of credit 646 2,292 Immigration bond 25 31 Litigation claims - others 838 791

1,509 3,114 19. COMMITMENTS

Estimated amounts of lease expenditure committed at balance date but not provided for in the financial

statements:

a) Native and Crown leasehold land and other premises

Payable no later than one year; 1,260 1,340 Payable later than one year but not later than two years; 1,179 1,171 Payable later than two years but not later than five years; 3,500 3,478 Payable later than five years. 91,635 91,501

Total commitments 97,574 97,490

The Native and Crown leasehold land includes the lease obtained for Monasavu land. The settlement signed with Monasavu land owners and the iTaukei Land Trust Board commits FEA to the following future payments:

Payable no later than one year; 620 620

Payable later than one year but not later than two years; 620 620 Payable later than two years but not later than five years; 1,860 1,860 Payable later than five years. 51,640 52,260

20. CAPITAL EXPENDITURE COMMITMENTS

Capital expenditure contracted for at balance date but not otherwise provided for in the financial statements. 42,377 54,557

Projects approved by the Board but not contracted for at balance date 57,636 60,525

The capital commitments include the Wainisavulevu Weir Raising Project, Dreketi - Seaqaqa 33kV overhead reticulation and the Labasa 11kV Switchgear upgrades.

21. EvENTS OCCURRING AFTER BALANCE DATE

a) The Government announced during the 2013 National Budget, a reduction in tarrif rates by 5% across all tariff bands effective from 1st January 2013. This will adversely impact the revenue of the Authority in 2013.

b) On 5th March 2013, the Authority signed a loan agreement with Westpac Banking Corporation for the Refinancing of the China Development Bank USD$30M loan in Fijian dollars.

Apart from the above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Authority, the results of those operations, or the state of affairs of the Authority in future financial years.

6160



22. SIGNIFICANT EvENTS DURING THE YEAR

a) The Government of Fiji as part of its 2012 National Budget announced some major tax changes. The Authority subsequently implemented these tax changes effective from 1st January 2012 and some of the proposed changes is expected to impact FEA’s tax position.

b) On 15th March 2012, the Authority and the iTaukei Trust Fund signed a Sale and Purchase Agreement for FEA to acquire the Head Office Complex at 2 Marlow Street, Suva from the iTaukei Trust Fund at a cost of $6.5M (VEP).

c) On 14th September 2012, the Authority officially commissioned the US$150M Nadarivatu Renewable Hydro Scheme. The project will greatly assist FEA achieve its long term objective of producing 90% of its energy from renewable sources by 2015 in addition to improving the reliability and security of power supply.

d) The Authority invited written tenders from local financial institutions for the refinancing of US$30M loan of the China Development Bank loan in Fijian dollars. This tender was awarded to Westpac Banking Corporation as at year end. The refinancing of this foreign currency loan in Fijian dollars will eliminate any foreign currency risk attached to this loan (Refer Note 2.1 (a) (i)).

e) There were three unplanned contingency events that caused widespread damage to the FEA infrastructures in 2012. The first two being the flash floods in January and end of March and Cyclone Evan in December adversely impacting the financial performance of FEA during the year.

f) FEA obtained approval from the Ministry of Finance on 23rd October 2012 for the 40% fuel economy investment allowance under Part IV of the Income Tax Act. This investment allowance is specifically for the Nadarivatu Hydro Power Project. This will assit FEA’s tax position in 2012.

23. PRINCIPAL ACTIvITIES AND PRINCIPAL PLACE OF BUSINESS

The principal activities of the Authority are the generation, transmission, distribution and sale of electricity on Viti Levu, Vanua Levu and Ovalau as governed by the Electricity Act and Regulations. The address of Fiji Electricity Authority registered office and principal place of business is 2 Marlow Street, Suva, Fiji Islands.

24. RELATED PARTY TRANSACTIONS

a) The Authority is a statutory body constituted by an Act of Parliament and the transactions with the Government of Fiji during the year are as follows:

2012 2011 $’000 $’000

Government guarantee fee expenses incurred during the year 499 418

The Government of Fiji also provides guarantees on the bonds issued by the Authority. As at balance date, the Authority had borrowed funds amounting to $324M under this guarantee.

b) Directors

The names of persons who were directors of the Authority during the year 2012 are as follows:

Nizam-ud-Dean (Chairman) Gardiner Henry Whiteside (Deputy Chairman)

Isikeli Voceduadua (Resigned May 2012) Akosita Drova (Appointed June 2012)

Francis Kean Hasmukh Patel (Ex-officio Member)

Aseri Radrodro (Appointed March 2012)

The directors fees paid during the year were $51,917.

62



24. RELATED PARTY TRANSACTIONS (CONT’D)

(c) Key Management Compensation

The aggregate remuneration and compensation paid to the Key management personnel, for the financial year ended 31 December 2012 and 2011 were: 2012 2011 $’000 $’000

Salary, perfomance pay and allowances 1,033 1,052

Superannuation 94 137 Other benefits 33 265

Total 1,160 1,454

(d) During the year, the Authority has supplied electricity to the Government of Fiji, other Government owned entities, directors and related entities and to executives at normal commercial rates, terms and conditions.

(e) Year-end balances arising from sales/purchases of services

Receivable from related parties: (Note 9)

Government of Fiji 3,527 2,153

6362


TRANSMISSION & SUB-TRANSMISSION CENTRAL

DISTRICT 132kV O/H Line (km) 33kV O/H Line (km) 33kV U/G Cable (km) Substations Transformer MVA

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

Wailoa - Cunningham 62 62 1 1 120 120

Cunningham - Kinoya 'A' 3 3 1 1

Cunningham - Kinoya 'B' 3 3 1 1 54 54

Cunningham - Vatuwaqa 4 4 1 1 19 19

Cunningham - Hibiscus Park 'A' 7 7 1 1 26.6 26.6

Cunningham - Hibiscus Park 'B' 5 5

Cunningham - Sawani 10 10 1 1

Vatuwaqa - Suva 5 5 1 1 45.6 45.6

Kinoya - Vatuwaqa 4 4

Kinoya – Nausori 18 12 2 1 15 15

Nausori – Sawani 6 2 1 1

Hibiscus Park - Wailekutu 6 6 1 1 6.25 6.25

Hibiscus Park - Suva 3 3

Wailekutu - Deuba 38 38 1 1 6.25 6.25

Cunningham - Komo 6 1 30

Komo – Hibiscus Park 3

TOTAL 62 62 66 66 41 54 9 11 292.7 322.7

DISTRIBUTION NETWORK CENTRAL

DISTRICT

OVERHEAD LINES (km) UNDERGROUND CABLES (km)SUBSTATIONS INSTALLED KVA

High Voltage Low Voltage High Voltage Low Voltage

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

Deuba 167.933 168.532 128.09 128.288 16.704 16.764 41.306 41.306 208 210 19066 19582

Lami 51.798 52.4639 64.042 65.8337 45.12 45.27 4 4 162 164 45830 46430

Suva 16.877 16.877 146.347 146.347 217.145 218.087 42.93 43.03 190 196 103982 109432

Kinoya 131.934 134.427 195.337 197.48 59.933 59.983 33.33 33.33 295 299 82535 83785

Nausori 284.573 288.458 333.443 334.766 18.935 19.385 1.523 1.523 480 486 44495 44676

Korovou 284.212 284.212 235.242 235.663 2.758 2.758 0.08 0.08 303 303 5236 5236

Levuka 49.063 58.305 39.008 44.012 1.18 1.18 0 0 50 59 5564 5756

Wailoa 11 11 6 6 0 0 0 0 12 12 206 206

TOTAL 997.39 1014.2749 1147.509 1158.3897 361.775 363.427 123.169 123.269 1700 1729 306914 315103

Increase 16.885 10.881 1.652 0.1 29 8189

% Increase 2% 1% 0.5% 0% 2% 3%

DISTRIBUTION NETWORK - NORTHERN

DISTRICT

OVERHEAD LINES (km) UNDERGROUND CABLES (km)SUBSTATION INSTALLED kVA

High Voltage Low Voltage High Voltage Low Voltage

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

Labasa 398.956 399.062 720.316 721.335 12 12 4 4 389 390 22,695 22,700

Savusavu 109.595 109.883 83.725 84.2 7.038 7.038 1 1 113 119 6,581 7,158

TOTAL 508.551 508.945 804.041 805.535 19.038 19.038 5 5 502 509 29276 29858

Increase 1.494 0 0 7 582

% Increase 4% 3% 0% 0% 4% 2%

DISTRIBUTION NETWORK - WESTERN

DISTRICT

OVERHEAD LINES (km) UNDERGROUND CABLES (km) SUBSTATION INSTALLED kVA

High Voltage Medium/Low Voltage High Voltage Medium/Low Voltage

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

Sigatoka 342.74 353.396 515.93 517.562 6.2 6.2 9 9.51 421 428 25678 26460

Nadi - Tavua 1334.621 1342.913 1834.759 1839.308 162.85 163.235 73.139 73.325 1873 1900 155079 159949

Rakiraki 216.073 218.32 214.474 214.687 4 4 1 1 193 195 8065 8111

TOTAL 1893.434 1914.629 2565.163 2571.557 173.05 173.435 83.139 83.835 2487 2523 188822 194520

Increase 69.804 21.195 55.66 6.394 0.05 0.385 0.429 0.696 80 36 3638 5698

% Increase 3.8% 1.12% 2.2% 0.25% 0.0% 0.22% 0.6% 0.84% 3.3% 1.45% 2% 3.02%

StatIStICS 2012

64


TRANSMISSION & SUB-TRANSMISSION WESTERNDISTRICT 132kV O/H Line (km) 33kV O/H Line (km) 33kV U/G Cable (km) Substations Transformer MVA

2011 2012 2011 2012 2012 2012 2011 2012 2012 2012

Wailoa 1 1 110.5 110.5

Wailoa - Nadarivatu 80 23.4 2 2 98 98

Nadarivatu - Vuda 56.6

Nadarivatu SS to PS 5.2 56

Vuda - Pineapple Corner A 8 8 1 1 1 1 30 30

Vuda - Rarawai 32 32 1 1 12.5 12.5

Rarawai - Vatukoula 19 19 1 1 10 10

Vatukoula - Tavua 4 4 2 2 1 1 6.25 6.25

Vuda - Waqadra A 16 16 1 1 40 40

Vuda - Waqadra B 11 11 2 2

Waqadra - Sigatoka 59 59 1 1 5 5

Qeleloa 1 1 15

Maro 1 1 2 2

Sigatoka - Nacocolevu 29 29 1 1 5 5

Nacocolevu-Korolevu 1 1 6.25 6.25

Vuda - Rarawai Tee-off to Pineapple Corner

2 2 1 1

Wailoa - Wainikasou 29 29 1 1 10 10

Nagado - Sabeto 10 10 1 1 3

Maro-Natadola 5 1 1 10

TOTAL 80 85.2 219 219 6 12 15 16 335.5 419.5

GENERATION STATISTICS ( EXCLUDING INDEPENDENT POWER PRODUCERS)Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Units Generated Wailoa Hydro Mwh 343,655 357,279 322,489 315,569 481,098 462,986 436,081 382,963 424,818 466,765

Units Generated Wainiqeu Hydro Mwh 74 1,159 1,099 1,329 1,387 688 63 898 1,968 1,027

Units Generated Wainikasou Hydro Mwh 8,919 15,151 18,272 21,079 18,420 16,058 19,238 19,404 18,721

Units Generated Nagado Hydro Mwh 6,085 4,922 12,996 7,990 10,520 10,279 8,856

Units Generated Nadarivatu Hydro Mwh 29,892

Total Generated Hydro MWh 343,729 367,357 388,739 341,255 508,486 495,090 460,192 413,619 456,469 525,261

Units Generated in VLIS Diesels MWh 244,848 241,084 304,863 354,174 183,329 162,760 153,990 236,356 211,767 94,215

Units Generated Diesel Others MWh 39,773 41,110 41,169 40,189 41,740 46,178 43,670 52,537 44,453 48,187

Units Generated HFO Kinoya 30,920 60,807 112,264 126,237 83,540 128,881

Total Generated Thermal MWh 284,621 282,194 346,032 394,363 255,989 269,745 309,924 415,130 339,760 271,283

Unit Generated from Butoni Wind Farm 3,351 4,604 7,211 6,420 4,977 6,809

Units Generated from Solar panel Mwh 9 6 2 4 1 - - - - -

Total Generated Wind & Solar MWh 9 6 2 4 3,352 4,604 7,211 6,420 4,977 6,809

Total FEA Generation (MWh) 628,359 649,557 684,773 735,622 767,827 769,439 777,327 835,169 801,206 803,353

Made up of

Total VLIS Generation ( MWh) 588,512 607,288 642,505 694,104 724,700 722,573 733,594 781,784 754,785 754,139

Total Other Generation (MWh) 39,847 42,269 42,268 41,518 43,127 46,866 43,733 53,435 46,421 49,214

Station Auxilliary usage MWh 6,777 6,144 7,294 6,375 7,865 9,139 9,050 9,268 8,952 8,343

Auxilliaries as % of Generation 1.08% 0.95% 1.07% 0.87% 1.02% 1.19% 1.16% 1.11% 1.12% 1.04%

% contribution from Hydro 54.70% 56.56% 49.47% 46.39% 66.22% 64.34% 59.20% 49.53% 56.97% 65.38%

% contribution from Thermal 45.30% 43.44% 50.53% 53.61% 33.34% 35.06% 39.87% 49.71% 42.41% 33.77%

% contribution from Wind & Solar 0.00% 0.00% 0.00% 0.00% 0.44% 0.60% 0.93% 0.77% 0.62% 0.85%

% increase / (decrease) in Hydro Generation -24% 7% -8% 1% 49% -3% -7% -10% 10% 15%

% increase / (decrease) in Thermal VLIS Generation 108% -2% 26% 16% -48% -11% -5% 53% -10% -56%

% increase / (decrease) in Total Thermal Generation 85% -1% 23% 14% -35% 5% 15% 34% -18% -20%

% increase / (decrease) in Total Generation 4% 3% 5% 7% 4% 0% 1% 7% -4% 0%

Maximum Dam Level ( AMSL) 733 737 735 735 746 746 742 739 743 747

Minimum Dam level (AMSL) 714 719 721 721 728 728 723 727 735 731

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SA

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NA

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NA

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NA

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NA

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TAV

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UA

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TAV

UA

EG

ME

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EG

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MR

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A

33kV S

ubstation

FEA POWER SYSTEM

Fiji Electricity Authority2 Marlow Street,Private Mail Bag, Suva,Fiji Islands

www.fea.com.fj

annual report 2012 - welcome to efl...

Documents