letter to the minister - energy fiji...

F I J I E L E C T R I C I T Y A U T H O R I T Y | A N N U A L R E P O R T 2 0 1 1 1

LETTER TO THE MINISTER

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

Dear Minister,

Annual Report 2011

I am pleased to present the Fiji Electricity Authority’s Annual Report for 2011. The report provides a detailed summary of FEA’s performance in accordance with Section 25 of the Electricity Act Cap 180.

FEA made a financial profit of $51.9M after tax in 2011, which includes a net income tax benefit of $13.9M due to restating the Deferred Tax Liability and Future Income Tax Benefit to factor the reduction in corporate tax rate from 28% in 2011 to 20% in 2012.

Construction of the US$150M Nadarivatu Renewable Hydro Power Project progressed positively in 2011 and approximately 90 per cent of the construction work has been completed by the year end. The project is expected to be fully commissioned by the end of June 2012.

This project is a major step towards achieving the Authority’s renewable energy target of generating 90% of its energy through renewable resources by 2015.

The Authority continued to meet all its obligations and fulfill 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 2012 and beyond.

Sincerely,

Nizam-ud-Dean Chairman

2 F I J I E L E C T R I C I T Y A U T H O R I T Y | A N N U A L R E P O R T 2 0 1 1

The Honourable Prime Minister, Commodore Josaia Voreqe Bainimarama, at the opening of the Rural Electrification Scheme at Waidina and Viria, Naitasiri. This

is FEA and Government’s corporate social responsibility to ensure that the rural communities also receive electricity.


FEA recorded a profit after tax of $51.9M in 2011, which includes a net income tax benefit of $13.9M due to restating the Deferred Tax Liability and Future Income Tax Benefit to factor the reduction in corporate tax rate from 28% in 2011 to 20% in 2012. The profit after tax is equivalent to a Return on Shareholder’s Fund (ROSF) of 11%.

The profitability enabled FEA to carry out Capex works totalling $112M and repay matured bonds of $17M.

FEA met all the Financial Covenants signed with lenders for 2011. This ensured that Government being the sovereign Guarantor of the FEA Loans was not exposed.

FEA successfully negotiated the conversion of the US$30M loan (bridging finance for Nadarivatu Hydro Project) into a Fijian Dollar loan with ANZ bank in 2011 at favourable USD exchange rates resulting in a realized foreign exchange gain of around $1M. This contributed to the profit achieved for 2011.

FEA’s gearing ratio at the end of December 2011 was 41.3% which is within the international benchmark for power utilities of not more than 45%.The gearing ratio has been maintained at this level despite the increase in Capital Expenditure (CAPEX) for the year.

The shareholder value of FEA increased from $419.9M as at the end of 2010 to $472.0M as at the end of 2011.

As a result of stringent cost control measures implemented by management throughout the year, FEA achieved a saving of $4.1M in its operating expenditure (OPEX) when compared to budget. This contributed to the profitability recorded for the year.

FEA was able to successfully negotiate a settlement of a major Insurance Claim for the repair of a 10MW Heavy Fuel Oil (HFO) generating plant in Kinoya for F$12.2M. As part of the settlement, FEA acquired 7 x 1.6MW new Diesel Generator sets at a cost of only F$2M.

FEA was able to renew its material, business interruption and sundry insurance policies at reasonable premiums despite the tough and volatile insurance market.

The Cabinet and the Commerce Commission approved Phase 3 of the Tariff Increase was implemented with effect from 1 April 2011.This affected the Commercial and Industrial Customers only.

Nadarivatu Hydro Project was 90% complete at the end of 2011 and the project is expected to be fully commissioned by June 2012.

The conversion of the 2x6 MW Industrial Diesel Oil (IDO) generating sets to run on cheaper Heavy Fuel Oil (HFO) at the Vuda Power Station was 66% complete and

is expected to be fully commisioned by the end of May 2012. This project is being carried out at a cost of F$9.2M with a payback period of 2 years and thereafter resulting in a reduction in fuel cost.

Completed the design of the single circuit new 33kV Vuda - Pineapple Corner overhead line and the design of the substation extension at Pineapple Corner Zone Substation in Lautoka.

FEA completed the design of the double circuit new 33kV Vuda - Waqadra overhead line and the design of the substation extensions at Waqadra & Vuda Zone Substations.

The following major zone sub-stations which will cater for future demand and improve the reliability of the power supply in the Nadi district and Suva-Nausori corridor were constructed and commissioned at a cost of around F$34M:

• Kinoya Zone Substation in Suva

• Qeleloa Zone Substation in Nadi

• Komo Park Zone Substation in Suva and

• Nausori Zone Substation

FEA completed the peer review of the design of the Wainisavulevu Weir Raising Project in 2011 and signed a contract with Sinohydro Corporation for the construction of this project. The total contract is in FJD currency and does not expose FEA to any foreign currency movements. FEA has obtained a F$20M loan from ANZ to fund this project. The total cost of the project is estimated to be around F$27M.

FEA spent $9.33M on rural, commercial/industrial and power system reinforcement projects. A total of 5922 domestic customers and commercial/industrial customers were approved for connection in 2011.

Upgrading of Power System Protection Scheme for the existing Monasavu Hydro Scheme was completed at a cost of around $2.3M in order to align with the state of art protection scheme installed for the Nadarivatu Hydro Power project.

FEA spent $1.2M to upgrade its old 11kV switchgear at Korolevu zone sub-station. This will ensure reliability of power supply to customers in that area which includes prominent hotels.

FEA carried out the review of the entire FEA Power System Electrical Protection facilities at a cost of $0.5M to ensure safe and reliable operation of the power system.

The peer review of the feasibility studies for the Wailoa

KEY OUTCOMES FOR 2011


Downstream Hydro Project was carried out and a preliminary report was submitted by the Consultant in December 2011. The final report is expected to be forwarded to FEA by June 2012. This will then determine the best way forward to develop this project.

Conducted a feasibility study to determine the viability of developing a Hydro Project in the upper Navua River. Preliminary Report has been received and the full report will be submitted to FEA by the consultant in June 2012.

Achieved around 17% reduction in unplanned power outage duration as compared to 2010.

Achieved a record high ICT up time system performance of 99.976%.

Fully complied with all the statutory requirements related to the Corporate Performance of FEA.

Completed the Project Design Document (PDD) for the Nadarivatu Hydro Project to obtain carbon credit and the Clean Development Mechanism (CDM) validation process is in progress and was 95% complete by the year end. This process will be fully completed in early 2012.

Fully complied with the Essential National Industries (ENI) Employment Decree by offering Employment Contract Terms and Conditions to employees who are no longer classified as “workers” under the decree and successfully negotiated two Collective Agreements (Staff and Trade Persons) for employees who are defined as “workers” under the decree and can join a Bargaining Unit (BU). All HR Policies and Procedures are now aligned to the ENI Employment Decree.

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

Reviewed the Board and Employee Code of Conduct and aligned the same to the Crimes Decree and the ENI Employment Decree.

Successfully reviewed all the consumer security deposits to ensure compliance with the Electricity Act and mitigate any potential future bad debts write off. The required increase in deposit have been equally spread over a period of 6 months from November 2011 to April 2012.

Successful dissemination of information regarding FEA operations utilising all forms of media, presentations to schools, settlements, communities and other organisations.

Obtained approval for the land use at Nubuiloa Repeater Station. This will improve the RT communications in

Vanua Levu and some dark spots in Viti Levu. This RT communication site is very essential to FEA’s operations.

Achieved the following HSE Performance when compared to set targets:

Achieved Target

•Fatality Nil Nil

•Lost Time Injury Frequency (LTIF ) 4.8 5

Conducted a review of the Organization Structure of FEA and established the optimum organization structure.

Completed a comprehensive HR Development Plan and have started to implement retention strategies, training and succession planning. All positions in FEA now have two or three possible successors.

FEA was awarded the PRIZE level Recognition in the Fiji Business Excellence Awards. FEA is the only Organization in Fiji which applied for and received the PRIZE level in its first year.

FEA acquired way leaves, finalized the design and purchased land for the three zone substations in Vanua Levu to extend power supply to Dreketi. The orders for the purchase of materials for the 33kV transmission line from Labasa to Dreketi were placed with the suppliers by the year end. Tenders for the establishment of the three substations on “turn-key” basis was also completed by the end of the year. The cost of the Dreketi Electrification Scheme is $14.3M and is co-funded by FEA and Government on a 50-50 basis. This project supports Government’s “Look North” policy and the scheme is expected to be completed in June 2013.

Completed 90% construction of grid extension in Rukuruku - Nauouo Rural Extension at Ovalau. This is expected to be completed in March 2012. The total cost of this project is $0.85M, of which $0.5M was funded by the Government and $0.35M was funded by FEA.

FEA commissioned the new ONLINE Syntel prepayment vending system in August 2011. The new vending system has proven to be a good and robust system. Combined with the existing APN mobile phone network all transactions done at any vending station is online to FEA prepayment server.

Completed and commissioned thirty one Rural Electrification schemes to provide electricity to 1720 customers at a cost of $5.6M which was fully funded by the Government.


Captain (N) Timoci Lesi Natuva, the Honourable Minister for Works, Transport and Public Utilities during one of his visits to the Nadarivatu Hydro Project site in 2011.


MEMBERS OF THE AUTHORITY

Nizam-ud-DeanChairman

Gardiner WhitesideDeputy Chairman

Isikeli VoceduaduaMember

Francis Bulewa KeanMember (Appointed

September 2011)

John LowMember (Resigned

November 2011)

Cama TuilomaMember (Resigned August

2011)

Hasmukh PatelEx-Officio Member


EXECUTIVE MANAGEMENT TEAM

Hasmukh PatelChief Executive Officer

Bobby NaimawiChief Financial Officer/

Board Secretary

Filipe NainocaGeneral Manager

Customer Services

Fatiaki GibsonProject Director -

Nadarivatu

Om Dutt SharmaGeneral Manager Network

Eparama TawakeGeneral Manager

Generation

Tuvitu DelairewaGeneral Manager

Commercial

John O’ConnorGeneral Manager Human

Resources

Anand NanjangudChief Information Officer

Saumen BandyopadhyayGeneral Manager System

Planning & Control


Construction of the Nadarivatu Hydro Power Project progressed positively in 2011 with 90% of work completed by the year end. The project is expected to be fully

commissioned in June 2012.


Overview

The Fiji Electricity Authority was established, incorporated and constituted under the provisions of the Electricity Act of 1966 and began operating from 1st August of that year. The Fiji Electricity Authority is committed in upholding the principles of good corporate governance to ensure that the Authority is directed and controlled in a responsible, professional and transparent manner with the purpose of safeguarding its day to day operations.

Board Of Directors

The Authority has adopted a system of management and control based on the appointment of Board of Directors and specific sub-committees of the Board having both pro-positive and advisory functions to ensure decisions are above Board and are made in the best interests of FEA.

The Board of Directors are vested with the broadest powers for the management of the company, responsible for approving the adequacy of the organizational, administrative and accounting structure as well as ensuring effective compliance with the company’s policies and procedures.

Board Structure

The Board comprises of the Chairman, Deputy Chairman, Permanent Secretary for Finance, Permanent Secretary for Works, Transport & Public Utilities, CEO as an ex-officio member and three other non-executive members. Under the Electricity Act, the Minister for Works, Transport & Public Utilities appoints the Members of the Board.

The Members of the Board shall at all times conform to the Board Code of Conduct whilst discharging duties in their capacity as Board Members.

CORPORATE GOVERNANCE

Board Meetings

The FEA Board of Directors met 12 times during the year.

Director Number of Meetings Attended

Status

Nizam-ud-Dean 12 ChairmanGardiner Whiteside 12 Deputy Chairman

Isikeli Voceduadua 12 MemberJohn Low 3 Member - Resigned in November 2011Cama Tuiloma 8 Member - Resigned in August 2011Francis Kean 4 Member - Appointed in September 2011Hasmukh Patel 12 CEO & Ex-Officio Member


Board Sub-Committees

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

Major Projects Sub-Committee

The key role of the sub-committee is to assist the Board in fulfilling its responsibilities by overseeing the delivery of any major infrastructure projects being constructed by the Authority in a timely, efficient and cost effective manner including making decisions in relation to the project as and when required.

The sub-committee met 11 times during the year.

Audit & Finance Sub-Committee

The key role of the sub-committee is to oversee the performance of the Internal Audit function, thus providing assurance on the effectiveness of the Authority’s internal control processes and oversee the financial reporting as well as discuss risk management practices.


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.


Policy Based Corporate Governance

The Authority has also adopted a policy based on corporate governance to ensure that all employees are committed to the principles of corporate governance standards consistent with best practice, hence, the following policies were reviewed and approved in 2011 to strengthen corporate governance in FEA:

1) Whistleblower Policy

2) Gifts Policy and

3) Anti-Money Laundering Policy


FEA Board Chairman, Mr Nizam-ud-Dean, signing the contract with Sinohydro Corporation, the contractor of the Wainisavulevu Weir Raising Project. The project enhances FEA’s renewable energy objective as it will increase the water storage at the weir by another 8 metres and will benefit two existing hydro schemes namely the Wainikasou and Monasavu hydro schemes. The project is estimated to cost around $27M and will be completed within two years.


FEA consolidated its journey towards achieving its long term objective of generating 90% of its total energy requirements through renewable energy resources by 2015 with the Nadarivatu Hydro Power Project around 90% complete at the

end of the year. The project is expected to be commissioned in mid 2012. FEA has borrowed around $200M to fund this project which it has to service and repay over the next 15 years.

The commissioning of the Nadarivatu Hydro Power Project in 2012 is in line with FEA’s ten year power development plan which requires a total investment in the energy sector of around $1.5billion over a period of 10 years to meet the ever growing demand for electricity and importantly assist FEA and the nation mitigate the country’s dependence on the uncontrollable and exorbitant fuel price. In this regard, FEA is expected to invest substantially in the power generation and the transmission and distribution sector over the next 10 years.

FEA is firm in its resolve as it continues to explore and build energy capacity to ensure the reliability and the security of power supply to its customers in addition to ensuring the long term financial sustainability of the Company.

CHAIRMAN’S REPORT

2011 Profitability

FEA made a financial profit of $51.9 million after tax in 2011, largely due to the excellent perfomance from the Monasavu Hydro Scheme and stringent measures to control operational expenditures. This equates to a Return on Shareholder Funds (ROSF) of positive 11%.

The profitability of FEA for the period 2004 to 2011 is illustrated in the graph shown below:

FEA recorded an all time high fuel cost of $137.8 million in 2011 as compared to $126.8 million for 2010. This is equivalent to 77% of the total revenue for 2009. Had the tarrif increases in 2010 and 2011 not implemented then substantial losses could have resulted in 2011.

FEA implemented the final phase of

the tarrif increase to achieve an average 39.4 cents/unit from 1st April 2011. This tarrif is expected to assist implement FEA’s ten year Power Development Plan (PDP) which requires a total investment in the energy sector in excess of $1.5 Billion.

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 about $20 million of NCO costs when fulfilling its social obligations in 2011. 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, 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 2011 is a notional adjustment to account for the NCO costs which would have resulted in an after-tax financial profit of $66.3 million and a ROSF of positive 13.6% for the year. The adjusted profitability numbers and ROSF are shown in the next column for the period 2004 to 2011.

FEA appreciates the support provided by the Government through granting duty concessions for it’s Renewable Energy Projects and guaranteeing FEA’s borrowings. It is very important that

the Government continues to support FEA to ensure the long term financial sustainability of the organisation.

FINANCIAL STRENGTH

FEA’s gearing ratio, as measured by Debt to Debt plus Capital and Reserves excluding cash-in-hand, was 41.32% as at 31st December 2011, well within the international benchmark for power utilities of about 45% despite incurring Capital Expenditure of around $112 million in 2011. The gearing is at the higher end and thus limits FEA’s borrowing capability to fund other potential renewable energy projects and fulfil its ten year power development plan.

The shareholder value of FEA was $472 million at the end of 2011 which increased from $414.7 million at the end of 2010 and $324.9 million at the end of 2002. FEA’s total assets were worth $983 million, a substantial increase from

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2004 2005 2006 2007 2008 2009 2010 2011

After TaxAfter Tax

F$ m

illion

Before Tax

70

60

50

40

30

20

10

0

-10

-202004 2005 2006 2007 2008 2009 2010 2011

Account for NCOF$

milli

on

Before adjusting for NCO After adjusting for NCO


$925.6 million in 2010 and $456.7 million in 2002. This shows that FEA has added significant shareholder value over the last nine 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 2011 with the Steering Committee overseeing the restructure meeting three times. The Steering Committee is made up of the consultant Minter Ellison, representatives from the Ministry of Public Enterprises, Ministry of Finance, Office of the Solicitor-General, Ministry of Works, Transport and Public Utilities and representatives from FEA. Apart from the Steering Committee, there are two other sub-committees established to oversee the review of the Electricity Act (1966) and drafting of the IPO prospectus. The objectives of the Electricity Act review are to:

1. Identify the appropriate laws to provide for the corporatization of FEA;

2. Separate out the regulatory and Commercial Functions of FEA with:

• Governmenttoberesponsibleforallregulatory functions by a time no later than the date by which the partial privatization takes place; and

• TheCorporatizedFEAshouldoperate commercially and statutory powers are to be incorporated to enable it to carry out its commercial functions;

3. Redundant provisions should be removed; and

4. The language of the 1966 Act should be modernized wherever practical.

The review of the Electricity Act is almost complete and preparations for a new Electricity Decree are underway to replace the old Electricity Act 1966.

The Sub-Committee responsible for the IPO prospectus has completed a draft and is awaiting the appointments of an Independent Accountant and Investment Advisor to review the long term financial projections of FEA and the structuring of shares to sell to the Public. The restructure of FEA is expected to be completed in 2012.

BUTONI WIND FARM

Butoni wind farm generated 4.98 million units of electricity in 2011. This is equivalent to a fuel cost savings of around $2.13 million in 2011.

14.0

12.0

10.0

8.0

6.0

4.0

2.0

-2.0

0

-4.0

2004 2005 2006 2007 2008 2009 2010 2011

Return on Shareholder Funds to Account for NCO

Before adjusting for NCO

Perce

nt (%

)

After adjusting for NCO

The wind turbines at the Butoni wind farm are able to be lowered during a

cyclone to avoid substantial damages

kilo

wat

t-ho

urs

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

2007 2008 2009 2010 2011

Butoni Generation (KWh)


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

• TotalGenerationOutput = 25.7millionunitsof electricity

• TotalDieselFuelCostSavings = F$8.59million

• TotalForeignExchangeSavings = F$5.8million

• TotalDieselFuelSaved = 5404tonnesofdiesel

• TotalEmissionReduction = 16,799tonnesof Carbon Dioxide

One of the main factors that affected the operation of the wind farm in 2011 was the low wind speed recorded.

PROGRESS ON RENEWABLE ENERGY PROJECTS

The construction of the 40MW Nadarivatu Renewable Hydro Power Project is progressing well with overall completion of 90% by year end and the scheme will be commissioned by the mid 2012. This would greatly assist FEA move towards achieving its renewable energy target of 90% from renewable energy sources by 2015. FEA has secured all the necessary funding essential to complete the Nadarivatu Hydro Power Project in 2012.

The Validation Process for carbon credits for the Nadarivatu Hydro project under the Clean Development Mechanism (CDM) is 90% complete and submission to the United Nations Framework Convention on Climate Change (UNFCCC) is envisaged by June 2012.

A full feasibility study for the Qaliwana Hydro Project has been

completed and discussions with interested Independent Power Producers to develop this potential energy source is ongoing. In addition, two further studies on the review of the Wailoa Downstream feasibility report and the feasibility study of the upper Navua River Hydro developments are currently in progress with the final reports expected in June 2012.

On completion of the these feasibility studies, FEA will prioritise the projects and then call for Expressions of Interest (EOI) from Independent Power Producers (IPP) to develop these projects and sell electricity to FEA. This approach will be taken due to the limitations on the borrowing capability of the Authority.

The Ministry of Finance approved the extension of the Government Guarantee via the Cabinet on 12th October 2010 to enable the funding of the current major projects, especially the funding of the Nadarivatu Hydro Power Project.

FEA awarded the tender for the construction of the Wainisavulevu Weir Raising Project to Sinohydro Corporation of China for a contractual sum of $20.5 million. The total cost of this project is $28 million of which FEA will fund $7.5 million using its own cash. Sinohydro has commenced the project by constructing the road and has mobilised on site. When completed, this project is expected to bring about improvements in the water storage capacity of the existing Wainikasou and Monasavu hydro schemes and will result in increased energy output from the two power stations.

FEA commenced a feasibility study to determine the viability of developing a Hydro Project in the region of the upper Navua River.


The FEA Board developed eight Key Performance Indicators (KPIs) for 2011 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 2011. The actual achievement of the KPIs is detailed below:

ACHIEVEMENT OF BOARD KEY PERFORMANCE INDICATORS

1 Achieve a ROSF of at least 2.5% provided the proposed average tariff of 39.4c/unit is implemented from 1st April 2011.

The audited ROSF as at end of December, 2011 is a positive 11%. This is due to the good rainfall received at the Monasavu catchment during the year which enabled more energy to be generated from hydro in addition to the final tariff increase of an average 39.4 cents/unit implemented from 1st April 2011. Further a net income tax benefit of $13.9M due to restating the Deferred Tax Liability and Future Income Tax Benefit to factor the reduction in corporate tax rate from 28% in 2011 to 20% in 2012 also contributed to the Profit after Tax. The generation mix as at end of December 2011 was 59.4% renewable and 40.6% thermal.

2 Fully comply with the following statutory requirements:

Submission of 2012 to 2014 Corporate Plan, SCI and EIRP by 30 September 2011

Submission of half year report for 2011 financial year by 1st August 2011

Submission of draft annual report and un-audited financial accounts for 2010 by 31 March 2011

Submission of the annual report and audited financial accounts for 2010 by 31 May 2011

Achieved. Submitted on 29th September, 2011

Achieved. Submitted on 27th July, 2011

Achieved. Submitted by 31st March, 2011

Achieved. Submitted by 31st May, 2011

3 Carry out feasibility studies for one major Renewable Energy Project

Achieved. A preliminary report of the feasibility study for the Upper Navua River was completed by the end of the year.

4 Ensure that Nadarivatu Hydro Project construction work is progressed on time and fully commissioned by the end of the year.

In progress. Work completed YTD December was 90% and commissioning has started at the Weir and Switchyard. It is envisaged that the first machine will be commissioned in May 2012 and the other to follow soon after.

5 Complete 100% of Government funded RE Projects as per the schedule by 31st December 2011.

Achieved. Completed all the 31 Government funded RE schemes as per schedule by 31st December 2011.

6 Finalise contract price with Contractor and Commence construction of Wainisavulevu weir raising project subject to availability of funds.

Achieved. Signed contract with Sinohydro Corporation in December 2011. Mobilsation work commenced in December together with the construction of road to the project site.

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

The following work has progressed:a)Award Battery Tender Vuda and Cunningham. Technical evaluation completed & Management Approval received for award to CBS Power Solutions. Award letter sent. Business case approved on 1 Dec 2011. b)Award contract 132kV Current Transformer and Capacitive Voltage Transformer – Tender awarded to DELSTAR.c)132kV Insulator replacement (50) – 59 towers have been successfully completed, target for 2011 was 50 towers. d)Evaluate tender for New 11/132kV Wailoa Transformers– Tender closed on 16th September, evaluation in progress.e)Completed 30% of structure refurbishment Vuda, Cunningham - Scope & Condition Report is being prepared for the replacement of tower bolts, tower washing, rust treatment and painting - Tender awarded to Linetech of New Zealand. f)Research 145 kV Isolators and control panel upgrade - Tender documentation research complete. g)Governor Upgrade from Analogue to Digital - Tender awarded to GE Energy and contract signed in October 2011. h)Monasavu Dam Instrumentation Upgrade - Tender awarded to Dam Watch New Zealand, contract signed in December 2011. i)Wailoa battery Charger Replacement - Tender awarded to North Power, New Zealand, contract signed in December 2011.

8 Establish financial viability on the conversion of the two Vuda Wartsila Generating Sets from IDO to HFO operation and if positive seek Board approval, commence implementation and complete Project as per plan.

Board approval sought via Board Paper 5692 in February 2011, work is in progress at the Tank Farm according to plan with 66% of the work completed by the end of the year. Completion scheduled for May 2012.


AUGMENTATION OF THE TRANSMISSION GRID

The Qeleloa 33/11kV Zone Substation was commissioned in April 2011, followed by commissioning of Komo Park Zone 33/11kV Substation in May and Nausori Zone 33/11kV Substation in July 2011.

An Environment Impact Assessment (EIA) study for the construction of 132kV Wailoa – Nacocolevu transmission line was successfully completed in June 2011.

The electrical protection system on the two critical 132 kV 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 transmission line protection systems.

Protection Review Study of the entire FEA power system was carried out to ensure safe and reliable system operation.

Review of the FEA Grid Code was undertaken to align the FEA Grid Code to international standards.

The 9.3 MW wood-fired co-generation plant of Tropik Woods at its Drasa mill continued to struggle with its perfomance and produced only 17.59GWh of energy in 2011 out of a contracted quantity of 38.8GWh per annum. FEA is working closely with Tropik Woods to ensure the plant is able to generate the deemed quantity of 38.8GWh annually.

FEA completed the review and compilation of the Power Development Plan up to 2020. The plan was presented to the key stakeholders of Government and showed the road map which will enable the achievement of FEA’s target of 90% renewable energy by 2015.The plan incorporates both the generation and transmission capacity building over the next 10 years, and the associated investment level required.

TARIFF STUDY & POWER DEVELOPMENT PLAN

FEA implemented the final phase of the tarrif increase approved by the Fiji Commerce Commission and Cabinet to achieve an average 39.4 cents/unit from 1st April 2011. This tarrif will assist FEA implement its 2020 Power Development Plan.

A total investment in excess of F$1.5Billion will be required to develop the generation, transmission and distribution projects. Out of this, FEA will be required to invest around F$1.2 Billion while Independent Power Producers (IPP’s) are required to contribute $350M to assist in the development of the power generation sector.

PRODUCTIVITY IMPROVEMENTS

FEA has achieved significant productivity improvements since 2000. The number of employees has been reduced by 31%, from 960 in 2000 to 661 in 2011, at a time when:

• Numberofcustomersincreasedby33%,from117,315in2000 to 155,912 in 2011

• Generation output increased by 60%, from 523 giga-watt-hours in 2000 to 837GWh in 2011;

• Lengthofpowerlinesandundergroundcablesincreasedby 25%, from 7,124 km in 2000 to 8,943 km in 2011;

• Total assets increased by 108%, from $473 million in2000 to $983 million in 2011;

• Total shareholder funds increased by 49%, from $316million in 2000 to $472 million in 2011.

Protection Review Study of the entire FEA power system was carried out to ensure safe and reliable

system operation.


As a result, the following productivity improvements have been achieved between 2000 and 2011:

• Customers per employee increased by 93%;

• Generation output per employee increased by 135%;

• Length of power lines and underground cables per employee increased by 82%; and

• Assetvalueperemployeeincreasedby149%.

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 objectives. My special thanks to Mr Cama Tuiloma and Mr John Low, who left our Board in 2011, for their constructive contribution made to FEA during their term.

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

I also record my sincere thanks to the Fiji Commerce Commission for their understanding of FEA’s difficult position and approving the implementation of the tariff increases with the final phase implemented from 1st April 2011.

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

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

Nizam-Ud-Dean Chairman


Work is in progress to convert 2x6MW Industrial Diesel Oil (IDO) generating sets to run on cheaper Heavy Fuel Oil (HFO) at the Vuda Power Station. The project is

expected to be completed by May 2012.


FEA performed admirably in 2011 recording a profit after tax of $51.9M. This was achieved partially due to the good rainfall received at the Monasavu catchment (which produced 425GWh of energy in 2011, above the long term average of 400GWh) and implementing the final phase of the tariff increase to achieve an average 39.4 cents per unit from 1st April 2011. The average cost of producing a unit of electricity from diesel was in excess of 40 cents per unit in 2011.

The reduction of the Corporate Income Tax Rate from the current 28% in 2011 to 20% in 2012 required the Deferred Tax Liability and Future Income Tax Benefit carried on FEA’s balance sheet to be re-instated. The Net Income Tax effect due to the adjustments was included in the Income Statement of FEA, resulting in a Net Income Tax Benefit of $13.9M.

The positive financial performance enabled FEA to carry out capital expenditure (Capex) works totaling $112M and repay matured bonds amounting to $17M in 2011. The capex of $112M is one of the highest achieved in FEA’s history, as it had to carry out critical capex that had been deferred from past years due to poor financial performance as a result of the low electricity tariff. These ageing assets pose a risk to the reliability and security of power supply to our customers

and need to be replaced and upgraded with urgency. FEA realized that if it prolonged the replacement and upgrade work of these key assets, then it was putting the entire power system at risk and therefore FEA commenced to carry out these critical capex with utmost priority in 2011.

The next three years will bring a lot of challenges to the Authority. FEA envisages a total capex of around $183M and repay matured bonds and loans totaling $136.4M. This is a huge financial commitment and requires that FEA must make profits and generate surplus cash in order to have the ability to fund these CAPEX (averaging $60M annually) and repay matured bonds and loans when they fall due. The total bonds and loans maturing in 2012 are around $37M, as we plan to refinance 2 by $20M loans that are maturing in 2012. Therefore it is imperative that FEA continue to make Profit after Tax of at least $40M annually over the next three years to ensure it has the ability to fund critical capex and repay matured bonds and loans when they fall due. This will ensure the reliability and security of power supply to its customers and safeguard Government being the guarantor of the FEA loans.

I thank the Chairman and the Board of Directors 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 2011.

I also record my sincere thanks and appreciation to the 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 Trade Union executives for their kind assistance, support and cooperation rendered in 2011.

Their invaluable contribution 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

Despite the good profitability level achieved in 2011 of $51.9M post-tax, FEA’s working capital is still vulnerable with a closing cash balance of around $3.4M at the end of 2011. This is equivalent to one week’s fuel cost at fuel prices prevailing in 2011. FEA is still faced with the mammoth task to build new energy capacity to cater for increased demand of electricity and maintaining existing assets which are considered it’s “Golden Goose”. Therefore it is imperative that FEA manages its business model diligently to ensure that it remains financially sustainable to meet its day to day operational obligations and achieve its long term objectives.

CHIEF EXECUTIVE OFFICER’S REPORT


FEA places a very high importance on addressing the concerns of customers with urgency. FEA customer service representatives provide services to customers on a

daily basis at all major locations.


CUSTOMERS

Customer Service

The number of customer accounts increased by 3 per cent, from 151,410 in December 2010 to 155,912 in December 2011. The breakdown in customer accounts are made up of: Industrial 93 (0.06%); Commercial 14,563 (9.34%) and Domestic and Institutional 141,256 (90.6%). The increase in customer accounts was mostly in the Domestic sector recording a growth of 3% most of which were in remote rural areas as a result of the Rural Electrification extension programs. There was a significant decrease in demand for electricity by an overall 3.1 per cent, from 764.23 million units in 2010 to 740.87 million units in 2011. The main decrease in electricity consumption was in the Domestic sector, with demand decreasing by 6 per cent, from 232.5 million units in 2010 to 218.5 million units in 2011. Demand also fell by 3.6% in the Commercial sector with the only growth being in the Industrial (Maximum Demand) sector which grew by 1.6%. The reduction in electricity demand for the Domestic and Commercial sectors could be attributed to the increase in electricity tariff leading to increased energy use awareness and energy savings strategies implemented by customers in the two sectors. Energy savings promotional programs initiated by both FEA and Department of Energy 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 meet Government subsidy requirements and thus take advantage of the subsidy offered. With the focus on improving power quality, excessive reactive kVar units billed increased from 5.7 million units in 2010 to 7.1 million units in 2011 an increase of around 24%.

Contact Centre

The Contact Centre continued its excellent performance in 2011. The Grade of Service (GOS) achieved for the year was 93.3% with Calls Abandoned at 4.1%. This was an excellent result in a challenging year where the Contact Centre was required to manage information flow to customers on the new tariff rates, disconnection and reconnection, upgrade in consumer security deposits, prepayment issues and unplanned and planned power shutdowns. Total calls received to 31st December 2011 was 367,149, an average of 30,595 calls a month. This was a decrease of 2.5% from 2010 when a total of 376,379 calls was received. The reduction in call volume was the result of a strategy to proactively disseminate information through community awareness in both print and radio media. With a concentrated and coordinated approach in 2012 it is anticipated that the call volume will continue to decrease. The focus continues to be on the quality of service delivered to the individual customers by Contact Centre Staff when answering the calls. This quality of service can be monitored by the introduction of technology such as call recording. 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. Use of the emergency 913 number for non emergency calls continues to be a concern with a total of 21,063 calls received on this number of which only 2229 were genuine emergency calls.

For the 2011 Customer Services Survey, six survey questions were prepared and survey forms sent out to customers with their electricity bills. 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 more consistent results.

Prepayment

Changes in the tariff structure including the introduction of the Government subsidy put substantial pressure on the Actaris “Off Line” prepayment system. By April 2011 it was clear that the system was not able to cope with the requirements of the new tariff structure and required to be replaced. An “Expression of Interest” was put out and Syntel, a South African based company, was selected to provide and implement the new system. The new ONLINE Syntel prepayment vending system was commissioned at the end of August 2011 and has proven to be a good robust system. Combined with the existing APN mobile phone network all transactions carried out at any vending station is online direct to FEA HQ main prepayment server. All issues with the old system have now been resolved. All rural electrification customers were metered using prepayment meters with installation of more than 2,382 prepayment meters in 2011.

Product Awareness

Media presentations on FEA services and safety issues continued to be the main focus in FEA’s customer communication activities during the year. Customers and the general public were encouraged to report safety issues such as fallen power lines or low lying power lines and vegetation in the vicinity of power lines that were likely to affect them. Information on the electricity tariff and review of consumer security deposits, together with advice on how to save energy and reduce electricity bills, were provided during radio talk back shows and interviews on television, radio and print media. Information on projects currently undertaken by FEA, including Rural electrification projects, were also provided during these interviews and radio talk back shows. Presentations were also made to secondary schools and communities, especially communities who were being

REVIEW 0F 2011


electrified for the first time, to create awareness on energy savings and electrical safety and complete desired customer documentation. Training was also provided in these rural communities on how to use the new prepayment meters that would be installed. FEA also continued to use its billing network to maximize the dissemination exposure of its safety messages, by printing messages on the electricity bill itself and providing information bill inserts on how to calculate and read power bills and required consumer security deposits.

Demand Side Management

FEA continues to assist its customers become more energy efficient by providing technical advice and billing data to those customers who request for such data. In 2011, the Demand Side Management Team of FEA completed two energy audits, one for the Reserve Bank of Fiji and the other for Future Farms, a poultry farm in Ba. The report provided these two customers with an in-depth knowledge of their energy consumption and on how they could reduce their energy consumptions. FEA also visited several schools in the Central and Northern Divisions making presentations on Energy Savings and Electrical Safety.

An agreement was reached with the Ministry of Education for a study into the development of a teaching module on Electrical Safety and Energy Savings into the school’s curriculum. The study would determine if the module could be introduced into primary and secondary schools.

FEA’s Reactive Metering Policy was strictly monitored during 2011 with reactive energy metered for those customers using excessive reactive energy. Excessive reactive energy usage increased by around 24% in 2011 when compared to 2010.

Electricity Tariff

There was one electricity tariff increase for the year approved by Cabinet and the Fiji Commerce Commission. The increase came into effect on the 1st of April 2011 which affected the Commercial and Industrial categories only. As a result of the tariff increase in 2011, the average price per unit increased from 29.64 cents in December 2010 to 38.75 cents in December 2011, an increase of 30.7%. This brought about a significant increase in billed revenues which increased by 27.3% from $227.93M in 2010 to $290.21M in 2011.There were many challenges involved in the introduction of the new electricity tariff due to the complex nature of the new tariff and its application. The challenges were met and the new tariffs were implemented accurately and on time.

In view of the tarrif increases implemented in 2010 and on 1st April 2011, it was imperative that a review of all the consumer security deposits be carried out and analysed. The required deposits were compared with the actual deposits held and the additional deposits calculated. The additional deposits required were communicated to each customer via a letter inserted in their electricity bills. Customers who inquired

with our Contact Centre were also provided with this information. All customers were given the option of either paying by cash or provision of a bank guarantee of a sum equal to the required deposits. The new consumer deposits required was implemented in October 2011 with customers initially given 3 months to pay for the additional deposit. The three months was then extended to six months after feedback from customers that the time provided was too short.

EMPLOYEE, EMPLOYEE RELATIONS, TRAINING AND DEVELOPMENT AND HEALTH, SAFETY & ENVIRONMENT

FEA continues to recognize that its people are essentially the drivers of the business systems and processes and to achieve optimum performance, the effective management of people is vital. Successful Organizations recognize the critical importance of investing in their people and increasing their value to their organization. It is the quality people who provide companies with their competitive advantage.

One key factor in employee motivation and retention is the opportunity for employees to continue to grow and develop their job and career enhancing skills. While FEA recognizes that investment in its people through training and development is vital for employee retention and motivation, it is also important to ensure that any investment in training and development adds value to the employee but more importantly to the Authority and is aligned to the employees’ career development and the Authority’s succession planning.

The FEA has been listed as one of the Designated Corporations in accordance with the Essential National Industries and Designated Corporations Regulations 2011 which was gazetted on the 8th of September 2011. As a Designated Corporation, the Authority is required to fully comply with the requirement of the Essential National Industries (Employment) Decree 2011 which was gazetted on the 29th of July 2011.

The introduction and commencement of the Essential National Industries (Employment) Decree 2011 with effect from the 8th of September 2011 provided a major challenge and shift in the management of Employment and Industrial Relations in FEA with the focus shifting to the alignment of the terms and conditions of employment to ensure the viability and sustainability of the organization.

The FEA Board endorsed the Strategies and the Action Plans to ensure full compliance to the Decree and also focused on the “Sustainability of the Organization”. The successful implementation of the Action Plans also ensures the alignment of the FEA’s Human Resources, Industrial Relation and People Strategies to the Essential National Industries (Decree) 2011, the privatization of FEA and the promotion and upkeep of employee rights.

FEA also recognizes that there is a current restructure of the Organization being undertaken by the Ministry of Public


Enterprise. Therefore, the strategies implemented in 2011 also focused at preparing FEA and its employees for the likely changes that would be brought about by the partial privatization of FEA.

FEA continued to aspire to be an agile and lean organization that is able to adopt quickly to Business challenges. Strategies were implemented to ensure the “Right Sizing” of FEA and determining the optimum staffing level of the organization but at the same time continuing to promote productivity through the implementation of a performance management system for all its employees. During the year, FEA also focused in building a disciplined workforce that is loyal and committed to ensuring compliance to policies, safety rules, respective manuals, procedures and other FEA administrative circulars.

Staff Numbers

2011 was a very challenging year for FEA in terms of its human capital. Twenty two (22) very experienced employees with an average of more than 25 years experience in the electricity industry retired from FEA. In addition, thirty two employees resigned from the Authority, the majority of whom migrated overseas. Ten employees were terminated by the Authority due to breaches of policies and procedures. While we started the year with 673 employees, we ended the year with a total of 661 employees.

Recognizing the risks of the competitiveness of the overseas market for our engineers and technical staff and that we were in no position to compete with these markets and to ensure we build capacity, FEA reintroduced the apprentice scheme and recruited 10 new apprentices earlier in the year. Furthermore, FEA engaged technically qualified attachees from the National Employment Centre to build capacity and have readily available experienced staff to mitigate the risk of migration. These attachees are engaged for a maximum period of 6 months and should they perform exceptionally and live the values of FEA, then they are absorbed into the workforce provided a suitable position becomes vacant.

The performance of employees of FEA continued to be assessed based on the Performance Management System the Authority had arrived at and signed Agreements with the three Unions. The Performance Management System replaced the COLA and annual merit increments. The Board and the Management of FEA acknowledge and wish to thank the three Unions representing the FEA employees, namely the Fiji Electricity Workers Association, Electrical Trades Union and the Construction, Energy and Timber Workers Union of Fiji for their support in the achievement of this milestone.

Staff Training

In 2011, the FEA Training & Development Framework was implemented with the main focus on Mandatory Authorization and Refresher Training including Contractor Management and Safety Awareness Training. Training on the Power Development Plan and electrical protection of the power system was carried out by the Power Research Development Consultants.

The Mandatory training conducted included Live Line Refresher Training for the FEA Live Line team in the 33kV/11kV category by Glove & Barrier Energy Services Pty Ltd and the 132kV category by Bill Matthews Consultant, Defensive Driving Course by LTA, First Aid & CPR Course by Red Cross, Induction Training for new recruits by FEA and Dog Training by the Fiji Police for Meter Reading Attendants.

Other external Training conducted included Project Management Fundamentals for the Nadarivatu Hydro Project Civil and Network Engineers, Team Leader Training, Professional Business Writing Skills and Corporate Governance Training. The Customer Service Skills Workshop was also carried out for all FEA employees by Human Resources Development South Pacific and FICAC facilitated workshop on Anti-Corruption and Risk Management Workshop. The IT Power Consultant also conducted the Clean Development Mechanism Training for the Generation

One key factor in employee motivation and retention is the opportunity for employees to continue to grow and develop job and career enhancing skills


teams manning the FEA Renewable Stations and on the job training at the Nadarivatu Hydro Project.

Ten new apprentices were recruited in the Plant Maintenance trade, Electrical Fitter Mechanic trade and Telecommunication Technician level for the Central, Western and Northern regions. Eight trainee Cable Jointers completed their training and were offered work contracts including upgrade to fully fledged Cable Jointers.

The Training Department and ICT team also participated in workshops on Industry Standards Advisory Committee for the Fiji Qualifications Framework on Electrical Fitter, Mechanical and Telecommunications Trades and SPC In Country Consultations on the Pacific Register of Qualifications and Standards.

The FEA Training Centre was issued a Certificate of Recognition to operate legally as a Training Provider in Fiji by the Fiji Higher Education Commission on 17 May 2011 with the Recognition No. of the Institution as RCN 0067/10.

The Training team submitted and won the BIDS for the Pacific Power Association Training for the Pacific Region Utilities in OHS, Generation, Network Operation and Maintenance and this programme is scheduled to be conducted in early 2012.

Internal advertisement for Sponsorship of employees to pursue Advanced Diploma in Electrical/Mechanical Engineering and Bachelor of Engineering degree courses in Electrical & Mechanical Engineering were also

carried out and FEA Management team will finalise the successful applicants in 2012.

FEA continued to support and engage industrial student attachments from the various institutions of Fiji in 2011.

Apart from the above training programmes, staff also continued with their own development programmes in the various areas of their interest which include Diplomas, Advanced Diplomas, Degrees and Post Graduate studies.

Employee Development and Succession Planning

In 2011, the FEA Board approved a comprehensive FEA Training and Development Framework that will ensure that all training and development programmes for all employees are aligned to the achievement of the full competencies for each employee appointed to respective position, employee career development plans and the Authority’s succession plans.

The FEA Training and Development Framework also clearly identified likely successors to all critical positions from the Permanent Tradesperson, Team Leader, General Manager to the Chief Executive Officer level. Training and development plans for all the identified possible successors for each position have been implemented to ensure that these employees are ready to replace the post holders should they decide to leave FEA.

Inculcating FEA Values

FEA continued to place great importance in inculcating its core values in all its employees. The Human Resources Policy and Procedures Manual was reviewed after the implementation of the ENI Decree to ensure alignment to the provisions of the Decree. The Employee Code of Conduct was also reviewed and amended accordingly to reflect changes in the Crimes Decree and ENI Decree which was approved by the Board.

Furthermore during 2011, FEA continued to reinforce discipline within the organization and during the year 10 employees were terminated for serious breaches of FEA policies and procedures. FEA continued to reinforce the Government’s policy regarding zero tolerance on fraudulent activities.

Industrial Relations

FEA continued to have a cordial relationship with the three Unions in the first half of the year. Towards the second half of the year, FEA’s Industrial Relations was focused on ensuring compliance with the requirements of the Essential National Industries (Employment) Decree 2011. The implementation of the ENI Decree 2011 also brought about the termination of old outstanding issues relating to the terms and conditions of employment with one of the Unions.

In line with the provisions of the ENI Decree 2011 there was a noticeable reduction in the number of eligible employees who could become members of a Bargaining Unit.

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


At the end of the year, the Fiji Electricity Workers Association (FEWA) was registered as a Bargaining Unit which represented two categories of employees in the Staff and the Tradeperson Categories.

FEA and the FEWA Bargaining Unit have also signed two Collective Agreements for the respective employee categories and this have been registered with the office of the Registrar of Trade Unions.

To ensure compliance with the ENI Decree 2011, FEA offered contract terms and conditions of employment to all the employees who were no longer defined as a “Worker” in accordance with the ENI Decree 2011 and all these employees accepted and signed their contracts of employment by the end of 2011.

Health, Safety and Environment (HSE)

FEA is committed to supporting a total Health, Safety and Environment improvement culture where all employees have the necessary tools, methods and personal attributes to actively care for the safety of themselves, their co-workers and members of the public.

This commitment and drive, led by the Board and the Executive Management, ensures that FEA continues to achieve best practice in terms of its safety results. FEA is totally focused on a continuous improvement culture to achieve the ultimate goal, which is

“SAFE PRODUCTION, ZERO INCIDENTS”.

Consolidation and embedding of the Fleet Policy manual continued with all FEA drivers to help them perform their driving safely and professionally in order to protect themselves, other employees and members of the public from risks arising out of fleet operations. Transport Committee sittings were conducted on a monthly basis to hear all motor vehicle related accident cases including complaints from members of the public. A total of fifty seven (57) drivers appeared before the Committee which included twenty five (25) windscreen and twelve (12) third party cases. Of the twenty FEA driver initiated accident cases, one (1) was a major accident which accounted for 31% of accident costs in this category while the remaining nineteen (19) were relatively minor accidents stemming from momentary driver loss of attention. Total accident costs for 2011 were the lowest over the past five years with accident numbers on a downward trend.

Defensive Driver Training continued to be conducted for authorized FEA drivers in 2011.

FEA Contractor HSE Management System Training and Refreshers were conducted with new and existing FEA Network Contractors to ensure they met minimum legislative requirements and complied with FEA’s policies and standards. Contractor worksite

inductions were carried out on the field for all network contract works awarded.

Workplace audits were conducted by HSE Officers at all locations and identified corrective / improvement actions required. A total of one thousand, one hundred and forty-nine (1,149) Safety Visits were carried out to address Safety Issues and raise the safety profile.

Internally, a rigorous hazard identif- -ication and corrective improvement action register continued to be maintained and monitored. A total of one thousand four hundred and sixty five (1,465) corrective actions were identified in 2011 against nine hundred and fifty (950) in 2010. Of these corrective actions, one thousand and eighty (1080) were completed with three hundred and eighty five (385) pending.

A centralised electronic data-base was developed by the HSE team and rolled out across all FEA locations. Employees were given hands on training to enable them to register HSE issues and monitor associated corrective/improvement actions.

HSE committees continue to fulfill an important role by performing their functions effectively. A total of thirty five (35) near misses, incidents and accidents were investigated by the HSE team and recommendations tabled and registered as corrective/improvement actions.

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


Because of the inherent dangers in dealing with electricity, extensive education and training is essential to ensure the safety of FEA workers and the public at large.


PRODUCTION

Water Management

The storage level of the Monasavu lake at the beginning of 2011 was 738 metres above mean sea level (AMSL), which was 23 metres above the minimum safe operating level of 715 metres.

Above-average rainfall during the months of January, February, May, October, November and December 2011 helped increase the storage level to 741 metres AMSL at the end of the year.

Total rainfall in 2011 was 4,925mm compared with 5,072 mm in 2010. The lowest ever rainfall recorded is 3,540 mm in 2004.

In 2011, the FEA renewable power stations generated 489 Giga Watt-hours (GWh) of electricity, thermal power stations 340 GWh and Independent Power Producers (IPP) 36 GWh.

The average generation mix for 2011 was 55 per cent hydro, 40 per cent diesel and heavy fuel oil, 1 per cent wind with the other 4 per cent provided by the Independent Power Producers (IPPs), namely Tropik Wood Industries Limited and Fiji Sugar Corporation. In comparison, 48 per cent was generated from hydro in 2010, 34 per cent from diesel, 15 per cent heavy fuel oil, 1 per cent from wind with the other 2 per cent from Tropik Woods and Fiji Sugar Corporation.

The Monasavu Dam has been instrumental in providing renewable source of energy to Fiji since 1983 and has contributed to the successful development of our economy.

0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

OtherFEA ThermalFEA Hydro

2011 MONTHLY GENERATION MIX (GWH)

10

20

30

40

50

60

70

80

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

100

90

80

70

60

50

40

30

20

10

0

HYDRO-THERMAL GENERATION MIX

Hydro & IPP

Perce

nt (%

)

Thermal

1200

1000

800

600

400

200

0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 RAINFALL COMPARED WITH PAST YEARS

2011 Average past 28 years

Rainf

all (m

m)


Butoni wind farm generated 4.97 million units of electricity in 2011 while Tropik Wood’s 9.3 MW wood-fired co-generation plant at its Drasa timber mill continued to suffer frequent breakdowns and managed to produce 17.59 million units of electricity compared to 4.71 million units in 2010. Tropik Wood is expected to sell some 38.8 million units of electricity per annum to FEA. FEA replaced the short fall in supply from Tropik Wood by burning expensive thermal fuel.

Power System Reliability

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

• Theaveragetotallengthoftimethatacustomeriswithoutpower over a year is measured by the System Average Interruption Duration Index (SAIDI). This has improved by 20 per cent, from 794 minutes in 2010 to 637 minutes in 2011.

• The average number of times that a customer’s powersupply is interrupted in a year is measured by the System Average Interruption Frequency Index (SAIFI). This index improved from 15 times in 2010 to 13 times in 2011.

• The average time that a customer iswithout powerperinterruption is measured by the Customer Average Interruption Duration Index (CAIDI). This index improved from 53 minutes in 2010 to 49 minutes in 2011.

The main reasons for the power interruptions that occurred in 2011 were:

• Planned maintenance works on overhead lines andunderground cables (29 percent)

• Natural disasters e.g. flood, lightning, cyclone, etc. (29percent)

• Faultsonpowerlinehardwares(37percent)and

• Vegetationinterferingwithpowerlines(5percent)

FEA needs to spend substantially to reinforce its power system

in order to improve the reliability of power supply to be in line with best performing international utility benchmarks of similar size.

The initiatives FEA is currently pursuing include:

• Live-line maintenance of its power lines at all voltagelevels;

• Effectivevegetationmanagementprogram;

• Useofappropriatetechnologytodetectdefects thatcanbe fixed on time and equipment that can restore power supply quickly; and

• Ensuring that adequate supply capacity is available tomeet the demand for electricity at all times.

FINANCIAL PERFORMANCE

Profitability

FEA made a financial profit of $51.9 million after tax in 2011, which includes a net income tax benefit of $13.9M due to re-stating the Deferred Tax Liability and Future Income Tax Benefit to factor the reduction in corporate tax rate from 28% in 2011 to 20% in 2012. This profit equates to a Return on Shareholder Funds (ROSF) of positive 11%.

This result was achieved partially due to the good rainfall received at the Monasavu Dam which produced 425GWh of energy, above the long term average of 400GWh and implementing the final phase of the tariff increase resulting in a tarrif of average 39.4 cents/unit from 1st April 2011. Relatively, the average cost of producing a unit of electricity from diesel was in excess of 40 cents/unit in 2011.

Earnings before interest, tax, depreciation and amortization (EBITDA) for 2011 were $93.9 million. This provided an EBITDA net interest coverage ratio of 3.89 times.

Revenue from electricity sales for 2011 was $288.8 million compared to $226.9 million in 2010, an increase of $61.9 million. This was a result of the impact of the electricity tariff increase for the entire year 2011.

2010

2011

2009

750

745

740

735

730

725

720

715

710

705

700

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

MONASAVU DAM STORAGE LEVEL

Dam

Leve

l in m

etre

s abo

ve M

SL


Other operating revenue of $16.8 million in 2011 was higher by $12.2 million compared to the $4.6 million earned in 2010.The increase is due to the insurance payment of $10.9 million for the Business Interruption and Material Damages for the Kinoya Generator set damaged in 2011.

The total operating expenses of FEA excluding fuel costs, depreciation and amortisation was $73.7 million. This has increased by $15.9 million when compared with the $57.8 million incurred in 2010. This is due to the increase in repairs and maintenance cost for transmission lines and generator assets in 2011.

The net thermal fuel cost increased substantially by $11.1 million in 2011, from $126.8 million in 2010 to $137.9 million in 2011. This was largely due to substantial increases in the prices of IDO and HFO fuels as compared to 2011. The thermal fuel cost accounted for 57% of FEA’s total operating expenses of $242 million in 2011 compared with 59% in 2010.

Depreciation expense increased by $1.08 million in 2011 due to depreciation for additional assets transferred from capital

work in progress to the Fixed Assets Register in 2011. This includes the two power stations namely the Wainikasou & Nagado Power Stations acquired by FEA from Sustainable Energy Limited in 2010.

Net financing costs decreased by $0.4 million in 2011, from $11.3 million in 2010 to $10.9 million in 2011. This is due to the repayment of matured bonds of $17 million in July 2011. Interest costs amounting to $13.1 million were capitalised to the capital projects in 2011, compared with $13.2 million for 2010.

The additional borrowings for 2011 include new bonds amounting to $5.5 million and a $20 million loan from a commercial bank. The Fiji Government provides a financial guarantee for all of FEA borrowings.

Electricity generated from the thermal power stations decreased significantly by 75GWh in 2011. This was due to the good rainfall received at the Monasavu dam and dampening of the electricity demand due to the implementation of the tarrif increase.

The total hydro generation increased from 414GWh in 2010 to 456GWh in 2011 largely due to the good rainfall received in Monasavu. The Wailoa hydro power station generated 425GWh in 2011, higher than the 383GWh that was recorded in 2010. Total quantity of IDO fuel burnt in 2011 was 53,238 tonnes and HFO fuel burnt was 17,648 tonnes, aggregating to 70,886 tonnes. In comparison, the total quantity of IDO fuel burnt in 2010 was 60,113 tonnes and HFO was 27,483 tonnes, aggregating to 87,596 tonnes. The decrease in the total thermal fuel burnt for 2011 was due to maximising hydro generation from Monasavu as a result of the good rainfall received in 2011.

The average price of IDO fuel was $2,079 per tonne in 2011 (against a budget price $1,900 per tonne) compared to $1,539 per tonne in 2010. The IDO price peaked at $2,235 per tonne in May 2011.The average price for HFO was $1,542 per tonne in 2011 (against a budget price $1,500 per tonne) compared with $1,244 per tonne in 2010.

2003 2004 2005 2006 2007 2008 2009 2010 2011

250

300

200

150

100

50

-

ELECTRICITY SALES REVENUE

F$ m

illion

90

80

70

60

50

40

30

20

10

-

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

TOTAL IDO AND HFO FUEL USAGE

Tonn

es (‘0

00)

2003 2004 2005 2006 2007 2008 2009 2010 2011

800

700

600

500

400

300

200

100

-

ELECTRICITY SALES VOLUME

GWH

Residential Commercial Industrial

IDO

Residential Commercial Industrial

HFO


Financial Strength

FEA’s gearing ratio, as measured by Debt to Debt plus Capital and Reserves excluding cash-in-hand, was 41.3% as at 31st December 2011, well within the international benchmark for power utilities of about 45% despite incurring Capital Expenditure of $112 million in 2011.

The shareholder value of FEA was $472 million at the end of 2011 which increased from $414.7 million at the end of 2010 and $324.9 million at the end of 2002. FEA’s total assets were worth $983 million, a substantial increase from $925.6 million in 2010 and $456.7 million in 2002. This shows that FEA has added significant shareholder value over the last nine years since the implementation of organisational reforms.

Capital Expenditure & Funding

FEA incurred a total of $112M on capital projects in 2011, compared with $84M in 2010. This is one of the highest ever in its history and was made possible through the good cash flows generated and borrowed funds. The Capex of $112M was made up of the Nadarivatu Hydro Project ($76M),

Network Augmentation Project ($5.5M), HFO Conversion Project at Vuda ($6.4M), purchase of 7x1.6MW Cummings Generator sets ($5.8M), Rural and Urban Reticulation works carried out in 2011 ($12M), Protection Upgrade works ($2M), replacement of motor vehicles ($2M) and other assets aquired in 2011 of $2M.

FEA has acquired the necessary funding essential to complete the Nadarivatu Hydro Project in 2012 and no more loans will be required to complete the project. All the debt covenants imposed by lenders were satisfactorily met in 2011. This is essential to ensure that Government being the sovereign guarantor of the FEA loans is not exposed.

FEA has a total debt portfolio of around $359M as at 31 December 2011. This has to be serviced and repaid over the next 15 years. Around $82M of the total debt is due in 2012, $35M in 2013 and $20M in 2014 in addition to a CAPEX plan of $60M annually for the period 2012 to 2014 as shown in the table below.

2012 2013 2014 $M $M $M

Debt 37 35 20

CAPEX 60 60 60

Total Cash 97 95 80

As shown in the table above, FEA’s financial perfomance over the next 3 years will be critical in determining how successfully it can fund the above committments. It will have to keep aside cash surpus of at least $80M a year and this means that FEA has to record good levels of profits to generate the necessary cash reserves required. It is envisaged that 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 adopt a business model that will achieve the desired profiability level to ensure that it remains financially sustainable.

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 2012. The

Completed the Project Design Document (PDD) for the Nadarivatu Hydro Project to obtain carbon credit and the Clean Development Mechanism (CDM) validation process is in progress and is 95% complete. This process will be fully completed by Q-2 2012. Shown here is the newly constructed weir (dam) at Nadarivatu.

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IDO AND HFO FUEL PRICES

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Government guarantee was initially approved by Cabinet in October 2010 of an increase of $101M to cater for the funding requirements of FEA.

FEA obtained a new loan of $20M to fund the local component of the Nadarivatu Hydro Project. Further, it raised $5.5M in bonds to fund other smaller critical capital projects. It successfully negotiated with the Reserve Bank of Fiji to convert an existing foreign exchange loan of US$30M into a Fijian Dollar loan in 2011. This USD loan was fully converted into a FJD loan by December 2011 resulting in a realised foreign currency gain of around $1M. This conversion has eliminated any future foreign currency exposure attached to this loan.

FEA’s Power Development Plan for 2010 to 2020 has identified some Generation, Transmission and Distribution Projects that have to be developed to meet the ever increasing demand of electricity which is growing rapidly over the years. The total investment required will be in excess of $1.5 Billion over the next 10 years. FEA’s contribution is estimated to be around F$1.2 Billion with around $0.3 Billion coming from private investors interested in developing the power generation sector.

Internal Audit and Risk Management

The Board approved Internal Audit Charter governs the roles and responsibilities of the Internal Audit Department. The Internal Audit reports to the FEA Board through the Board Audit & Finance Sub-Committee. Internal Audit has greatly assisted the management in identifying opportunities to streamline existing processes and mitigating any deficiencies, thus creating a strong internal control environment.

The Authority has adopted a risk based internal audit which involves identifying, assessing and mitigating risks. In addition, recommendations made in the internal/external audit reports were implemented to improve the internal control processes. As a result of timely audits and investigations, a number of staff members were disciplined to reinforce values of the Authority.

Moreover, FEA continued its emphasis on the application and implementation of best practice risk management strategies across its business. An annual review of the FEA’s Top Business Risks was undertaken which indicated that the risk levels for 16 out of the 21 Top Business risks improved by one level whereas 5 business risks have remained at the same level.

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%.

In September 2011, FEA renewed its main insurance programme for another year after the insurers were satisfied with FEA’s business operations, including the level of maintenance of the assets and the controls that are in place to minimize or mitigate the risks.

POWER DEVELOPMENT PROGRAMME

FEA’s Power Generation Projects

The construction of the 40MW Nadarivatu Renewable Hydro Power Project is progressing well with overall completion of 90% by year end.

This would greatly assist FEA to move 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) is 90% complete with the relevant processes completed and submission to the UNFCCC is envisaged in June 2012.

A full feasibility study for the Qaliwana Hydro Project has been completed and discussions with interested Independent Power Producers to develop this potential hydro project are ongoing. In addition, two further studies on the review of the Wailoa Downstream feasibility and the feasibility study of the Upper Navua River Hydro development are currently in progress with the final reports expected in June 2012.

The Wainisavulevu Weir Raising Project has commenced construction in December 2011. The project is expected to be completed in January 2014.

Augmentation of the Transmission Grid

The Qeleloa 33/11 kV Zone Substation was commissioned in April 2011, followed by commissioning of Komo Park Zone 33/11 kV Substation in May and Nausori Zone 33/11 kV Substation in July 2011.

An Environment Impact Assessment (EIA) study for the construction of 132kV Wailoa – Nacocolevu transmission line was successfully completed in June 2011.

The electrical protection system on the two critical 132 kV transmission lines from Wailoa to Vuda in the Western region and from Wailoa to Cunningham in the Central region was upgraded to state of the art transmission line protection systems.

A Protection Review Study of the entire FEA power system was carried out to ensure safe and reliable system operation.

Review of the FEA Grid Code was undertaken to align the FEA Grid Code to international standards.

Transmission

The 132 kV Transmission Line Insulators were replaced on fifty-nine (59) transmission towers. Refurbishment works were completed on the 132kV circuit breakers at both ends of the Vuda – Wailoa and the Wailoa – Cunningham transmission lines.

The design of the dual circuit 33kV sub-transmission network from Vuda to Waqadra and single circuit from Vuda to Pineapple Corner in the Western Region was completed by the FEA in 2011.

33 kV Sub-transmission Development in the North

Design of a 33kV power line from Cawaira power station in Labasa to Dreketi and the Land acquisitions for the zone substations at Wailevu, Seaqaqa and Dreketi were completed in 2011. Orders were placed for the procurement of power poles, conductors and other line hardware by the end of the year.

On completion of the project, the power will be transmitted from Cawaira Power Station to Seaqaqa and Dreketi at 33kV. The 33kV sub-transmission 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/415V


FEA completed the $34M Major Network Augmentation Project with the full commissioning of the Nausori and Kinoya Zone sub-stations.


distribution network that already exists in Seaqaqa or will be constructed as part of this project in Dreketi.

The total estimated cost of the project is $14.3 Million and this cost is being equally shared between the Government and FEA. The Government paid $3.5 Million towards the project in 2011 with the remaining payment to be made in 2012.

Rural & Urban Projects

At the end of 2011, a total sum of $9,326,141 was authorized for rural, commercial/industrial, system reinforcement projects and contract works. Of this amount $6,076,803 was authorized for construction of thirty (31) rural electrification projects. $2,402,255 was authorized for construction of forty-six (46) commercial/industrial projects while $468,293 was authorized for nine (9) distribution system reinforcement schemes and $378,790 was utilized for six (6) contract jobs.

INFORMATION & COMMUNICATION TECHNOLOGY

A robust ICT system performance level of 99.976% was achieved in 2011, very close to international best practice of 99.999%. FEA has virtualized the IT Environment which has greatly added to the Performance, Security, Scalability and Reliability of the ICT Systems while containing costs at a low level. This has resulted in considerable savings in providing additional resources for new systems such as the new Online Prepaid Electricity Vending System.

This system installation was very cost-effective, smooth and completed in tight deadline thus bringing relief to the Pre-paid customers living in remote areas.

To enhance and improve the information security and Disaster Recovery Capabilities of FEA, the following have been installed & commissioned:

• KiwiSyslogServer–tokeeptheauditlogsofvariousITsystems

• VeeamBackupandReplication–toensuretheback-upof the virtual environment and also to keep the Disaster Recovery Centre updated in real-time.

To further strengthen the FEA’s radiotelephone network in the lower Sigatoka Valley and the Sigatoka/Korotogo areas, a new Radio Repeater was developed at the Butoni Wind Farm. This is to complement the PP3 Radio Repeater that was developed the previous year thus ensuring the reliable RT Communications in the service areas most of which were newly electrified Rural Electrification Projects in the remote areas. This also helped in adding two new auto-reclosers with remote control capability at Matanipusi Hill and the Warwick Hotel thus enhancing the reliability of the FEA Electricity Network in the surrounding areas.

The SCADA performance was very resilient inspite of some major problems encountered in the main server due to the availability of the Disaster Recovery system for failover.

Thus 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 Fiji Electricity Authority’s (FEA) Commercial division comprises of the Supply Chain and Regulatory operational units which have a total of seventy - two (72) employees.

Supply Chain

As one of FEA’s enabling units, the Supply Chain unit has maintained its ongoing focus on optimizing its performance in the critical result areas of procurement of goods & services, inventory management, as well as Fleet & Property Services.

Performance optimization of division was achieved through observing the following simple but key objectives:

• IncreaseSpeedofdeliveryofgoods&servicesrenderedtointernal & external customers

• ImproveQualityofgoods&servicesrenderedtointernal& external customers and

• ReduceCostsofprovidinggoods&servicestointernal&external customers

These key operational objectives are aligned to the Corporate Plan Objective of achieving 2.5% ROSF target set by the Government. Also attached to this objective is the Corporate Scorecard Key Performance Indicator (KPI) requirement for stockholding level which set a target of not more than $13million.

Given the above Corporate and aligned divisional objectives, the following key outcomes were achieved as at 31st December 2011;

A) Procurement of goods & services

• the actual average tender turnaround time of 5.28 weeks wasaccomplished for theyear (for tendersvalued to>=$10kAND<=$100k)againstatargetof6weeks

• In addition savings of around $1.2 million derived via procurement/tender negotiations and other supply chain efficiency cost initiatives, has enhanced FEA’s overall financial performance in terms of being able to maintain opex costs within budget.

B) Sound Inventory management, vigilance and best practices

• FEA has achieved the inventory stockholding level KPI (excluding fuel & engine spares) of $11.33 million, against a corporate target of $13 million.

• Stock-turns KPI (Improvement of rate of stock Utilization) was achieved at 18.1% against a target of greater than 6%. This achievement indicates that FEA’s stock items has been managed professionally and that stock has been turned over regularly and has contributed to significant savings in FEA’s working capital/opportunity cost.


C) Fleet & Property Services

• Although the Corporate Fleet Accidents KPI target was not achieved i.e. actual accident count of 20 (FEA driver initiated) against a target of 9 , our Fleet teams have an ongoing commitment to work with the Health & Safety team (HSE) to mitigate and reduce driving risks through specific driver attitude training including specialist vehicle training programmes.

• Facilitating process of re-acquiring the Head Office building complex property.

Regulatory

The Fiji Electricity Authority Regulatory unit is tasked with the major core function of the 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:

• registration and licensing of electricians & electricalcontractors;

• licensing of electrical generation equipment and retailersincluding licensing of new Independent Power Producers (IPPs);

• ensuring industry compliance, in accordance with theElectricity Act and AS/NZS Wiring standards;

• electrical testing of imported electrical appliances andfittings used in Fiji upon request.

The following key outcomes were achieved by this Unit as at 31st December 2011

A) Maintenance of Electrician & Contractor Registers

• total number of registered licensed electricians were 2,001 whilst only 1,249 had valid licences;

• total number of registered electrical contractors 249 and only 176 had valid licences;

• The public were advised of the importance of engaging only valid license holders for both registered electricians and electrical contractors and the list of licensed electrical contractors was published quarterly in the Fiji Sun.

B) Number of new installations inspected and approved for connections

• A total of 5,922 new connections were made in 2011 of which 5,450 were for domestic customers and 472 commercial customers.

C) Target of fixing 90 per cent of the power line faults in urban areas within 3 hours and for rural areas within 4 hours

• Exceeded target in achieving 97% for rural customers and 94 % for urban customers.

D) Ongoing and proactive Public Safety Awareness campaign

• Achieved target of 4 safety awareness presentations to various communities, villages & schools in the Western Division to ensure life and property are protected and safe.

In 2011, FEA has continued its support of the proposed transfer of the Regulatory function by collaborating and providing relevant policy & operational information to the Ministry of Public Enterprise engaged consultant, Minter Ellison.


PAGE 36 STATEMENT BY MEMBERS OF THE AUTHORITY

PAGE 37 INDEPENDENT AUDIT REPORT

PAGE 38 STATEMENT OF COMPREHENSIVE INCOME

PAGE 39 STATEMENT OF FINANCIAL POSITION

PAGE 40 STATEMENT OF CASH FLOW

PAGE 41 STATEMENT OF CHANGES IN CAPITAL AND RESERVES

PAGE 42 - 62 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

36 F I J I E L E C T R I C I T Y A U T H O R I T Y | F I N A N C I A L R E P O R T 2 0 1 1

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 2011.

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.

Dated at Suva this 15th day of May 2012.

Nizam -ud -Dean Gardiner Whiteside CHAIRMAN DEPUTY CHAIRMAN

STATEMENT BY MEMBERS OF THE AUTHORITYFor the year ended 31 December 2011

F I J I E L E C T R I C I T Y A U T H O R I T Y | F I N A N C I A L R E P O R T 2 0 1 1 37

I have audited the accompanying financial statements of Fiji Electricity Authority (Authority), which comprise the statement of financial position as at 31 December 2011, and the statement of comprehensive income, statement of changes in capital and reserves and statement of cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 38 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; and

(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 2011 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 2012 AUDITOR GENERAL

INDEPENDENT AUDIT REPORTFinancial Statement for the year ended 31 December 2011


Notes 2011 2010 $’000 $’000

Revenue - electricity sales 5 288,778 226,945 Other operating revenue 5 16,766 4,654 Total revenue 305,544 231,599

Personnel costs (17,941) (17,447)Fuel costs (137,881) (126,756)Electricity purchases (14,401) (12,611) Lease and rent expenses (1,830) (1,688) Depreciation on property, plant and equipment (29,914) (29,655) Amortisation of intangible assets (524) (528) Cyclone Mick & Tomas - Restoration costs - (1,445) Other operating expenses (39,584) (24,652) Total expenses (242,075) (214,782)

Profit before finance costs, income tax and interest in joint venture 63,469 16,817 Finance Cost:

Finance cost (12,054) (12,631) Interest income 741 1,278 Unrealised foreign exchange gain, net 271 7,534

Profit before income tax and interest in joint venture 6 52,427 12,998

Share of profit of joint venture - 192

Profit before income tax 52,427 13,190 Income tax expense 7(a) (517) (4,786) Profit after income tax 51,910 8,404

Other comprehensive income - -

Total comprehensive income for the year 51,910 8,404

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.

STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2011


Notes 2011 2010 $’000 $’000 CAPITAL AND RESERVES Retained profits 403,411 351,501 Capital contribution 68,641 63,199

472,052 414,700

Represented by:

CURRENT ASSETS Cash on hand and at bank 8 3,640 - Held to maturity financial assets 12(b) 23,409 55,837 Receivables and prepayments 9 42,888 32,617 Inventories 10 18,072 16,142 Withholding income tax recoverable - 328

88,009 104,924

NON-CURRENT ASSETS Property, plant and equipment 11 890,722 809,081 Available for sale financial assets 12(a) - 233 Intangible assets 13(b) 2,262 2,502 Deferred tax assets 7(b) 2,017 8,834 895,001 820,650

TOTAL ASSETS 983,010 925,574

CURRENT LIABILITIES Bank overdraft 8 - 276 Trade and other payables 14 43,407 49,626 Provision for employee entitlements 15 6,584 1,710 Interest bearing borrowings 16 36,661 71,628 Income tax payable 4,535 -

91,187 123,240

NON-CURRENT LIABILITIES Trade and other payables 14 49,679 40,047 Provision for employee entitlements 15 - 4,670 Interest bearing borrowings 16 322,624 280,181 Deferred income 17 10,706 11,563 Deferred tax liabilities 7(c) 36,762 51,173

419,771 387,634

TOTAL LIABILITIES 510,958 510,874

NET ASSETS 472,052 414,700

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.

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011


Notes 2011 2010 $’000 $’000

Cash flows from operating activities

Receipts from customers 296,394 223,544 Payments to suppliers and employees (237,226) (172,203) Interest received 770 1,240 Interest paid (24,069) (24,565) Insurance proceeds for business interruption 3,756 34 Advance tax / withholding tax paid (Net) (3,246) 2

Net cash flows from operating activities 36,379 28,052

Cash flows from investing activities

Acquisition of property, plant and equipment (79,289) (80,807) Acquisition of intangible assets (284) (470) Proceeds from loan advanced to joint venture - 10,356 Proceeds from repayment of joint venture loan - 2,174 Net redemption/(payment) for term deposits 32,457 (1,310) Acquisition of Sustainable Energy Limited - (2,270) Proceeds from capital contribution for general extension 5,442 4,256 Proceeds from disposal of motor vehicle 226 44

Net cash flows used in investing activities (41,448) (68,027)

Cash flows from financing activities

Repayment of bonds and loans (17,039) (18,576) Proceeds from bonds and loans 25,500 22,123

Net cash flows from financing activities 8,461 3,547

Net increase / (decrease) in cash held 3,392 (36,428)

Effect of exchange rate movement on cash and cash equivalents 298 (338)Transfer of Sustainable Energy Limited cash balance 226 -Cash and cash equivalents - at the beginning of the year (276) 36,490

Cash and cash equivalents - at the end of the year 8 3,640 (276)

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

STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2011


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

Balance as at 31 December 2009 58,943 343,097 402,040

Movement in reserves 4,256 - 4,256

Total comprehensive income for the year ended 31 December 2010 - 8,404 8,404


Movement in reserves 5,442 - 5,442

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


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.

STATEMENT OF CHANGES IN CAPITAL & RESERVESFOR THE YEAR ENDED 31 DECEMBER 2011


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 required by the Fiji Institute of Accountants.

Issue of Financial Statements

The financial statements were approved for issue by the Authority’s Board of Directors at its meeting held on 15 May 2012.

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 2012 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.

• IAS1(Amendment),‘FinancialStatementPresentation-PresentationofitemsofOtherComprehensiveIncome’.(1July2012)

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

• IFRS13(Amendment),‘FairValueMeasurement’.(1January2013)

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.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011


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

(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 flow, 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.

(i) Employee benefits

i) Sick leave

The provision is in relation to unutilised sick leave of non contract staff in accordance with their terms and conditions of employment and is calculated on current salary and wage rates.

ii) 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.

iii) 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.

iv) 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.

In view of the implementation of the Essential National Industries (Employment) Decree, with effect from 7th November 2011, all the Long Service Leave and Retirement Benefit Entitlements for employees have ceased. However, the benefits accrued up to 7th November 2011 will be paid to the employees in 2012.




(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 therefrom (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.

(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.

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 are not depreciated. Leasehold land are 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.




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

Repairs and maintenance

Repairs and maintenance are charged to the income statement 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.

(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.

(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.




(u) Taxation (Cont’d)

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.



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 financial 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$12.8 million term deposits 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 balances currently reflected in the Authority’s financial statements.

Held to Maturity Average Exchange Held to maturity financial assets (US$’000) rate (USD) financial assets (F$’000)

31 December 2011 (Actual) US$ 12,858 0.5493 23,409

Exchange rates - strengthen by 10% US$ 12,858 0.6042 21,281

Exchange rates - weaken by 10% US$ 12,858 0.4944 26,007

Based on the above, if average exchange rates strengthen by 10% the Authority’s investments in held to maturity financial assets would decrease by $2.13 million and if the average exchange rates weaken by 10% the Authority’s investments in held to maturity financial assets would increase by $2.60 million.

However, a risk arises on the Authority’s obligation with respect to the foreign currency loan of US$70 million (2010: US$97.5 million) which remains outstanding as at year end for funding of certain major capital projects. For the year ended 31 December 2011, the restatement of the Authority’s foreign currency loans has resulted in an unrealised foreign exchange loss of $70k. 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 Exchange Foreign currency borrowings (US$’000) rate (USD) borrowings (F$’000)

31 December 2011 (Actual) US$ 70,000 0.5493 127,435

Exchange rates - strengthen by 10% US$ 70,000 0.6042 115,856

Exchange rates - weaken by 10% US$ 70,000 0.4944 141,586

Based on the above, if average exchange rates strengthen by 10% the Authority’s foreign currency borrowings would decrease by $11.58 million and if the average exchange rates weaken by 10% the Authority’s foreign currency borrowings would increase by $14.15 million.

Furthermore, the Authority has awarded the Nadarivatu Renewable Hydro Power Project to a contractor based in China namely Sinohydro Corporation Limited for a contract amount of US$124.8 million. Accordingly, changes in the US dollars by 10% (increase or decrease) is expected to have a significant impact on the cost of the Nadarivatu Renewable Hydro Power Project . As at balance date, the balance of the Sinohydro contract is US$13.06 million.



2. FINANCIAL RISK MANAGEMENT (CONT’D)

2.1 Financial risk factors (Cont’d)

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 remeasured 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 2011.

(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 2011 (Actual) 1,945.11 70,886 137,881

Fuel price-Increase by 10% 2,139.62 70,886 151,669

Fuel Price-Decrease by 10% 1,750.60 70,886 124,093

Based on the above, if fuel price increase or decrease by 10%, the fuel costs to the Authority would increase or decrease by $13.8 million annually. The above senstivity calculation is based on the 2011 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 impact 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 borrows funds at fixed interest rates.

In relation to the borrowings from other commercial banks, the Authority to certain extent is not exposed to interest 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.



2. FINANCIAL RISK MANAGEMENT (CONT’D)

2.1 Financial risk factors (Cont’d)

(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 counterparties having similar characteristics. The carrying amount of financial assets recorded in the financial statements, 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 Authority 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.

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

Held to maturity financial assets 23,409 - - 23,409

Receivables and prepayments 42,888 - - 42,888

Total 66,297 - - 66,297

Financial liabilities:

Trade and other payables 43,407 12,106 37,573 93,086

Bonds payable 22,000 15,500 75,500 113,000

Interest bearing borrowings 14,661 118,653 112,971 246,285

Total 80,068 146,259 226,044 452,371



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 performed 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 deposit

The customer security deposits are classified as Current and Non Current based on the Authority’s past experience 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.

The gearing ratios at 31 December 2011 and 2010 were as follows: 31-Dec-11 31-Dec-10 $’000 $’000

Total borrowings (Note 16) 359,285 351,809

Less: Held to maturity financial assets (note 12 (b)) (23,409) (55,837)

Add: Bank Overdraft /(Cash on hand and at bank (note 8)) (3,640) 276

Net debt 332,236 296,248

Total capital and reserves 472,052 414,700

Total capital (total capital and reserves plus net debt) 804,288 710,948

Gearing ratio (net debt / total capital and reserves x 100) 41.31% 41.67%

The movement in the gearing ratio during 2011 resulted primarily from the net repayments of bonds of $11.5M and the increase in capital and reserves as a resullt of the profits recorded during the year.



5. OPERATING REVENUE 2011 2010 $’000 $’000

ELECTRICITY SALES Commercial 137,733 114,936 Industrial 71,399 49,541 Domestic 72,340 58,149 Others 7,306 4,319

Total electricity sales 288,778 226,945

OTHER OPERATING REVENUE

Bad debts recovered 18 5 Business interruption insurance claims received 10,919 34 Contract sales 1,014 448 Deferred income 857 856 Freight refund 452 632 Fuel surcharge - 6 Gain on disposal of property, plant and equipment 220 34 Lease rental - fibre optic 149 149 Power pole rentals 663 663 Rentals 38 45 Realised exchange gain, net 1,663 471 Sales and commissions 205 631 Service and licence fees 518 626 Training rebates 50 54

Total other operating revenue 16,766 4,654

Total revenue 305,544 231,599

6. PROFIT BEFORE INCOME TAX

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

Amounts recovered for doubtful debts (30) (95) Auditors’ remuneration for auditing services 21 21 Bad debts written off 139 232 Professional fees for other services 398 415 Directors’ fees 48 60 Depreciation on property, plant and equipment 29,914 29,655 Amortisation of intangible assets 524 528 Government guarantee fees 418 900 Insurance 4,309 3,613 Personnel costs 17,941 17,447 Unrealized foreign exchange loss 70 3,687



7. a) INCOME TAX EXPENSE 2011 2010 $’000 $’000

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

Profit before income tax 52,427 13,190

Prima facie income tax payable at 28% 14,680 3,693

Tax effect of amounts which are not deductible (taxable) in calculating taxable income: - Employee taxation scheme (19) (13) - Share of profit of joint venture - (54) - Deferred income (240) (240)

Temporary difference brought to account - 1,400

Effect of change in income tax rate (13,898) -

Over provision in prior year (6) -

Income tax expense attributable to profit 517 4,786

b) DEFERRED TAX ASSET

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

Tax losses - 5,969 Provision for employee benefits 897 1,308 Allowance for doubtful debts 42 67 Unrealised exchange losses 1,078 1,490

2,017 8,834

c) DEFERRED TAX LIABILITY

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

Property, plant & equipment 35,187 49,063 Unrealised exchange gain 1,575 2,110

36,762 51,173

Income tax expense comprises movements in:

Deferred tax assets 6,817 2,163 Deferred tax liabilities (14,411) 2,623 Income tax payable 8,111 -

517 4,786

The change in tax rate from 28% in 2011 to 20% in 2012 requires the Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL) to be restated in the Statement of Financial Position. The impact is a substantial reduction in the income tax expense by $14.7M after reducing the DTL in the Statement of Financial Position and increase in the income tax expense by $0.81M after reducing the DTA in the Statement of Financial Position to eliminate the carry forward tax losses. This resulted in a substantial reduction to the income tax expense by $13.89M recorded for the year.



8. CASH AND CASH EQUIVALENTS 2011 2010 $’000 $’000

Short term deposits 2,004 - Cash at bank and on hand 1,636 342 Bank overdraft - (618)

Total cash and cash equivalents 3,640 (276)

9. RECEIVABLES AND PREPAYMENTS

Electricity debtors 32,014 27,370 Other debtors 7,573 3,642 Vat Receivable 620 - Prepayments and deposits 2,893 1,847

43,100 32,859

Allowance for doubtful debts

- Electricity debtors (178) (208) - Other debtors (34) (34)

Total receivables and prepayments (net) 42,888 32,617

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 2011, electricity debtors of $24,868,896 (2010: $18,378,256) were not considered impaired.

As of 31 December 2011, the amount of electricity debtors impaired was $178,216 (2010: $208,169) net off deposits 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 242 337 Amounts recovered during the year (30) (95)

Balance as at 31 December 212 242

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 mentioned 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 Authority carried out another review of the Consumer Security Deposit in 2011 in view of the tarrif increases implemented in 2010 and 2011 respectively. The total carrying amount of cash security deposits in relation to the above trade receivables carried by the Authority is $23,703,004 (2010: $17,809,000). The rest are secured through bank guarantees maintained by the Authority.

10. INVENTORIES

Consumables - at cost 17,638 15,999 Goods in transit 434 143

Total inventories 18,072 16,142



11. PROPERTY, PLANT AND EQUIPMENT 2011 2010 $’000 $’000

Freehold land At cost 28,635 16,806

Leasehold land At cost 13,488 13,370 Accumulated depreciation (1,324) (1,181)

12,164 12,189

Buildings and improvements At cost 74,754 74,745 Accumulated depreciation (14,074) (13,102)

60,680 61,643

Dam, tunnels, water conductor At cost 186,335 186,316 Accumulated depreciation (29,981) (25,378)

156,354 160,938

Plant, equipment and transmission assets At cost 406,587 350,089 Accumulated depreciation (129,591) (110,560)

276,996 239,529

Furniture and fittings At cost 21,621 20,108 Accumulated depreciation (12,615) (11,611)

9,006 8,497

Wind mill At cost 34,394 35,349 Accumulated depreciation (7,612) (6,027)

26,782 29,322 Motor vehicles At cost 16,006 15,295 Accumulated depreciation (11,271) (9,857)

4,735 5,438

Capital spares At cost 4,571 3,775

Capital works in progress - Nadarivatu Renewable Hydro Power Project 287,478 223,911 - Network Augmentation Project - 25,801 - Rural and Urban Reticulation Project 3,306 10,021 - Turnkey Project 6,381 - - Others 13,634 11,211

310,799 270,944

Total - At cost 1,097,190 986,797 - Accumulated depreciation (206,468) (177,716)

Closing net book value 890,722 809,081



11. PROPERTY, PLANT AND EQUIPM

ENT (CONT’D)R

econciliation of the carrying amounts of each class of property, plant and equipm

ent at the beginning and end of the current financial year is set out as follows:

Dam

, Plant,

tunnels equipm

ent &

Capital

Freehold

Leasehold Buildings &

and w

ater transm

ission Furniture

Wind

Motor

Capital

work in

land

land im

provements

conductor assets

& fittings

mill

vehicles spares

progress Total

$’000

$’000 $’000

$’000 $’000

$’000 $’000

$’000 $’000

$’000 $’000

Balance as at 31D

ecember 2009

16,780 12,331

58,504 150,271

243,727 7,433

31,116 6,400

3,476 186,499

716,537

Additions

- -

- -

- -

- -

1,106 121,103

122,209 D

isposals -

- -

- -

- -

(10) -

- (10)

Transfers 26

- 4,094

15,209 14,483

2,105 -

1,369 (628)

(36,658) -

Depreciation charge

- (142)

(955) (4,542)

(18,681) (1,041)

(1,794) (2,321)

(179) -

(29,655)

Balance as at 31

D

ecember 2010

16,806 12,189

61,643 160,938

239,529 8,497

29,322 5,438

3,775 270,944

809,081

Additions

- -

- -

- -

- -

1,548 110,380

111,928D

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

ecember 2011

28,635 12,164

60,680 156,354

276,996 9,006

26,782 4,735

4,571 310,799

890,722

During the year, borrow

ing costs of $12,503,973 net of interest income of $631,810 w

ere capitalised to the cost of the Nadarivatu Renew

able Hydro Pow

er Project and Netw

ork Augm

entation Project.

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

inoya is almost com

plete. Subsequently, the title was legally transferred to the A

uthority in March 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 2012.

FEA m

ade substantial progress in 2011 with the construction of the N

adarivatu Renewable H

ydro Power Project. Total cost incurred during the year is $63.6m

and this has been capitalised to the project. The project is expected to be fully com

missioned in 2012.


12. FINANCIAL ASSETS 2011 2010 $’000 $’000 a) Available-for-sale financial assets

Equity accounted investments in joint venture - 233

The process of the voluntarily liquidation of Sustainable Energy Limited continued in 2011 and is expected to be completed in early 2012. The final meeting on the voluntary winding up was held on 26 January 2012 and subsequently the liquidator has lodged the final document with the Registrar of Companies to officially dissolve the Company.

b) Held-to-maturity financial assets

Short term deposits with banks 23,409 55,837

During the year, the Authority reinvested US$12.86 million 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 - -

Balance as at 31 December 1,614 1,614

Accumulated impairment allowance:

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


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.

b) Software License

Gross carrying amount: Balance as at 1 January 6,160 5,690 Additions 284 470


Accumulated amortisation:

Balance as at 1 January 3,658 3,130 Amortisation for the year 524 528 Balance as at 31 December 4,182 3,658

Net book amount 2,262 2,502

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 2011 2010 $’000 $’000

Current Trade creditors 16,411 29,675 Other creditors and accruals 20,475 13,090 VAT payable - 852 Accrued interest 4,625 4,954 Customer security deposits 1,896 1,055

Total current trade and other payables 43,407 49,626

Non-Current Other creditors and accruals 12,106 7,402 Customer security deposits 21,807 16,754 100% refundable deposits 15,766 15,891

Total non-current trade and other payables 49,679 40,047

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 Electricity Act. This is refunded to the customer when the electricity account is permanently closed. The 100% refundable deposits are the capital contribution from prospective customers or developer for the supply of electricity in accordance with the General Extension Policy. The amount is refunded to the customer over a period of 5 and 8 years respectively.

15. PROVISION FOR EMPLOYEE ENTITLEMENTS

Bonus 1,130 820 Sick leave - 71 Annual leave 969 819 Long service leave 1,049 1,317 Retirement benefits 3,436 3,353

Total provision for employee entitlements 6,584 6,380

Current 6,584 1,710

Non-current - 4,670

Total provision for employee entitlements 6,584 6,380

Balance as at 1 January 6,380 7,039 Additional provisions recognised/(utilised) during the year (net) 204 (659)

Carrying Amount 6,584 6,380

The Government introduced the Essential National Industries Decree (ENID) which became effective from 7th November 2011. FEA has been included as part of the ENID which requires the establishment of Bargaining Unit (BU). From 7th November 2011, all collective agreement with Trade Unions has ceased. The ENID requires new terms and conditions of employment to be negotiated with the BU. Subsequently, the FEA Board approved that all the employee entitlements in the form of long service leave and retirement benefits be paid out to the employees. In this regard, the long service leave and retirement benefits which previously used to be treated as a non current liability have been reclassified as a current liability in the Statement of Financial Position. The total amount payable is estimated to be around $4.5M.

Employee numbers 2011 2010 Number Number

Number of full-time equivalent employees as at 31st December 661 673



16. INTEREST BEARING BORROWINGS 2011 2010 $’000 $’000

Current

Bonds (a) 22,000 17,000 Term loan - ANZ Bank (b) - 54,589 Term loan - BSP ( c) 4,000 - Term loan - Suva City Council (d) 41 39 Term loan - CDB (e) 10,620 -

Total current interest bearing borrowings 36,661 71,628

Non-Current Bonds (a) 91,000 107,500 Term loans - ANZ Bank (b) 93,534 40,000 Term loan - BSP ( c) 16,000 - Term loan - Suva City Council (d) 5,275 5,316 Term loan - CDB (e) 116,815 127,365

Total non-current interest bearing borrowings 322,624 280,181

Total interest bearing borrowings 359,285 351,809

(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 $17 million were repaid during the year and bonds worth $5.5 million were issued and received during the year.

The maturing terms of the bonds range from 1 to 12 years, whilst the interest rates vary from 5.54% to 7.19% per annum. The bonds are guaranteed by the Government of Fiji.

(b)Term loans - ANZ Bank

The interest rates for ANZ Bank term loans are at 6.5% per annum. The Authority successfully negotiated the conversion of the foreign currency loan of USD$27.5M into a Fijian Dollar loan during the year.

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 $20 million from Bank of South Pacific (BSP) is subject to interest at the rate of 6.5% 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 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. The first loan repayment will be paid on 20 March 2012 and the final repayment is on 20 September 2023.

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



17. DEFERRED INCOME 2011 2010 $’000 $’000

EEC Grant In Aid

EEC Grant in Aid 12,330 12,330 Less: accumulated amortisation (6,295) (5,812)

Closing balance - 31 December 6,035 6,518

Government Grant For Rural Electrification

Government Grant for Rural Electrification 9,342 9,342 Less: accumulated amortisation (4,671) (4,297)

Closing balance - 31 December 4,671 5,045

Total deferred income (net) 10,706 11,563

The treatment of deferred income is in accordance with the policy set out in note 1(h) to the financial statements.

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:

Letter of credit 2,292 192 Immigration bond 31 31 Litigation claims - others 791 514

3,114 737

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; 1,340 1,705 Payable later than one year but not later than two years; 1,171 1,624 Payable later than two years but not later than five years. 3,478 4,837 Payable later than five years 91,501 96,256

Total commitments 97,490 104,422

FEA has entered into a Sale and Purchase Agreement with the iTaukei Trust Fund for the purchase of the Head Office complex. The purchase is expected to be finalised in early 2012 and the payment of annual rental of $503,325 (VEP) to the iTaukei Trust Fund will cease thereafter.

The Native and Crown leasehold land includes the recent 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. 52,260 52,880



20. CAPITAL EXPENDITURE COMMITMENTS 2011 2010 $’000 $’000

Capital expenditure contracted for at balance date but not otherwise provided for in the financial statements. 54,557 79,882

Projects approved by the Board but not contracted for at balance date 60,525 90,076

The capital commitments include Nadarivatu Renewable Hydro Power Project, Wainisavulevu Weir Raising Project and the conversion of the Diesel Generator sets to Heavy Fuel oil at Vuda Power station.

21. EVENTS OCCURRING AFTER BALANCE DATE

a) The Government of Fiji announced major tax changes as part of its 2012 National Budget. This will be implemented 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 aqcuired the Head Office complex at 2 Marlow Street, Suva from the iTaukei Trust Fund at a cost of $6.5M VEP.

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.

22. SIGNIFICANT EVENTS DURING THE YEAR

a) The Government of Fiji approved an increase in Value Added Tax (VAT) from 12.5% to 15% which was implemented from 1 January 2011.

b) On 1 April 2011 the final phase of the tariff increase approved by the The Fiji Commerce Commission and Cabinet of an average 39.4 cents/unit was implemented by FEA.

c) On 7th November 2011, FEA implemented the Essential National Industries (Employment) Decree (ENID). The decree requires the establishment of Bargaining Unit (BU) and the cessation of the collective agreements signed with the three trade unions. New employment terms and conditions have to be negogiated between the BU and the employer. As a result of implementing the ENID, the Long Service Leave and Retirement Benefits accrued up to 7 November 2011 will be paid out to the employees. The amount payable to the employees is outlined on Note 15.

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 principal place of business for the Fiji Electricity Authority is 2 Marlow Street, Suva or Private Mail Bag, 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:

Government guarantee fee expenses incurred during the year 418 900

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 $354 million under this guarantee.

On 12 October 2010, the Cabinet approved to increase the Government guarantee on FEA’s borrowings by F$101 million, primarily to fund the Nadarivatu Renewable Hydro Power Project in 2011. Further the Government has approved the extension of the above increase in government guarantee till 31st December 2012 to facilitate FEA’s capital expenditure programme.



24. RELATED PARTY TRANSACTIONS (CONT’D)

b) Directors

The names of persons who were directors of the Authority during the year 2011 are as follows:

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

John Low (Resigned November 2011) Isikeli Voceduadua

Cama Tuiloma (Resigned August 2011) Francis Kean (Appointed September 2011)

Hasmukh Patel (Ex-officio Member)

The directors fees paid during the year were $47,583.

(c) Key Management Compensation

The aggregate remuneration and compensation paid to the Key Management personnel, for the financial year ended 31 December 2011 and 2010 were:

2011 2010 $’000 $’000

Salary, bonus and allowances 1,052 1,055 Superannuation 137 145 Other benefits 265 337

Total 1,454 1,537

(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 2,153 1,055

(f) Transactions with Joint Venture before Acquisition

Operations & Maintenance fee charged - 52 Asset licence fee charged - 15 Project Manager fee charged - 7 Interest income from loans - 126 Loans repayments received during the year - 10,356 Electricity purchased during year - 737



STATISTICS 2011

TRANSMISSION & SUB-TRANSMISSION CENTRAL

DISTRICT132kV O/H Line (km) 33kV O/H Line (km) 33kV U/G Cable (km) Substations Transformer MVA

2010 2011 2010 2011 2010 2011 2010 2011 2010 2011

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

DISTRICTOVERHEAD LINES (km) UNDERGROUND CABLES (km)

SUBSTATIONS INSTALLED KVAHigh Voltage High Voltage Low Voltage Low Voltage

2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011

Deuba 167.748 167.933 127.167 128.09 16.704 16.704 41.306 41.306 206 208 18916 19066

Lami 51.798 51.798 63.757 64.042 45.12 45.12 4 4 161 162 45630 45830

Suva 16.227 16.877 146.347 146.347 211.675 217.145 42.93 42.93 188 190 103482 103982

Kinoya 126.066 168.646 195.137 210.439 59.933 59.933 33.33 33.33 292 322 81135 82986

Nausori 237.938 247.861 303.82 318.341 17.055 18.935 1.523 1.523 425 454 42192 44044

Korovou 270.016 284.212 218.797 235.242 2.758 2.758 0.08 0.08 279 303 4856 5236

Levuka 49.063 49.063 39.008 39.008 1.18 1.18 0 0 49 50 5559 5564

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

TOTAL 929.856 997.39 1100.033 1147.509 354.425 361.775 123.169 123.169 1612 1701 301976 306914

Increase 67.534 47.476 7.35 0 89 4938

% Increase 7.3% 4.3% 2.1% 0% 5.5% 1.6%

DISTRIBUTION NETWORK - NORTHERN

DISTRICT

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

High Voltage High Voltage Low Voltage Low Voltage

2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011

Labasa 395.01 398.957 718.625 720.316 12 12 4 4 383 389 22,548 22,826

Savusavu 109.15 109.595 83.18 83.725 7 7.038 1 1 111 113 6,265 6,581

TOTAL 504.16 508.552 801.805 804.041 19 19.038 5 5 494 502 28,813 29407

Increase 4.392 2.236 0.038 0 8 594

% Increase 0.9% 0.3% 0.2% 0% 1.6% 2.1%

DISTRIBUTION NETWORK - WESTERN

DISTRICT

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

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

2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011

Sigatoka 324.14 342.74 503.45 515.93 6.2 6.2 9 9 408 421 25407 25678

Nadi - Tavua

1328.34 1334.621 1824.7 1834.759 162.8 162.85 72.71 73.139 1848 1873 152454 155079

Rakiraki 171.15 216.073 181.353 214.474 4 4 1 1 151 193 7323 8065

TOTAL 1823.63 1893.434 2509.503 2565.163 173 173.05 82.71 83.139 2407 2487 185184 188822

Increase 69.804 55.66 0.05 0.429 80 3638

% Increase 3.8% 2.2% 0% 0.6% 3.3% 2%


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

2010 2011 2010 2011 2010 2011 2010 2011 2010 2011

Wailoa 1 1 110.5 110.5

Wailoa - Vuda 78 78 2 2 98 98

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 - Nocolevu 29 29 1 1 5 5

Nocolevu-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 78 78 219 219 6 12 15 16 335.5 363.5

GENERATION STATISTICS ( EXCLUDING INDEPENDENT POWER PRODUCERS)Years 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Units Generated Wailoa Hydro Mwh 448,253 343,655 357,279 322,489 315,569 481,098 462,986 436,081 382,963 424,818

Units Generated Wainiqeu Hydro Mwh 1,945 74 1,159 1,099 1,329 1,387 688 63 898 1,968

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

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

Total Generated Hydro MWh 450,198 343,729 367,357 338,739 341,255 508,486 495,090 460,192 413,619 456,469

Units Generated in VLIS Diesels MWh 117,763 244,848 241,084 304,863 354,174 183,329 162,760 153,990 236,356 211,767

Units Generated Diesel Others MWh 35,738 39,772 41,110 41,169 40,189 41,740 46,178 43,670 52,537 44,453

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

Total Generated Thermal MWh 153,501 284,621 282,195 346,033 394,364 255,989 269,745 309,924 415,130 339,760

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

Units Generated from Solar panel Mwh 9.52 9 6.20 1.53 4 0.74 0.21 - - -

Total Generated Wind & Solar MWh 10 9 6 2 4 3351 4604 7211 6420 4,977

Total FEA Generation (MWh) 603,709 628,359 649,558 684,773 735,622 767,827 769,439 777,327 835,169 801,206

Made up of

Total VLIS Generation ( MWh) 566,016 588,503 607,288 642,545 694,104 724,700 722,573 733,593 781,734 754,785

Total Other Generation (MWh) 37,683 39,846 42,263 42,268 41,518 43,128 46,866 43,734 53,435 46,421

Station Auxilliary usage MWh 4,815 6,777 6,144 7,294 6,375 7,865 9,139 9,050 9,268 8,952

Auxilliaries as % of Generation 0.80% 1.08% 0.95% 1.07% 0.87% 1.02% 1.19% 1.16% 1.11% 1.12%

% contribution from Hydro 74.57% 54.70% 56.55% 49.47% 46.39% 65.97% 64.52% 59.20% 49.53% 56.97%

% contribution from Thermal 25.43% 45.30% 43.44% 50.53% 53.61% 33.60% 34.88% 39.87% 49.71% 42.41%

% contribution from Wind & Solar 0.00% 0.00% 0.00% 0.00% 0.00% 0.43% 0.60% 0.93% 0.77% 0.62%

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

% increase / (decrease) in Thermal VLIS Generation 69% 108% -2% 26% 16% -39% -42% 20% 53% -10%

% increase / (decrease) in Total Thermal Generation 44% 85% -1% 23% 14% -34% 3% 16% 34% -18%

% increase / (decrease) in Total Generation 6% 4% 3% 5% 7% 5% 0% 1% 7% -4%

Maximum Dam Level ( AMSL) 736 733 737 735 735 746 746 742 739 743

Minimum Dam level (AMSL) 718 714 719 721 721 728 728 723 727 735

STATISTICS 2011

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