ZAMBEZI RIVER AUTHORITY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 Zambezi River Authority Annual Report and Financial Statements For the year ended 31 December 2018 Table of contents Page No Annual report 1-6 Statement of directors' responsibilities 7 Report of the independent auditor 8-10 Financial statements: - Statement of income and expenditure and other comprehensive income 11 - Statement of financial position 12 - Statement of changes in reserves 13 - Statement of cash flows 14 Notes to the financial statements 15-53 Appendices - Appendix 1- Statement of Capital Expenditure Compared to Budget 54 - Appendix II - Grant Funding Application Analysis - Batoka Gorge Hydro Electric Scheme 5 55 - Appendix III - Kariba Dam Rehabilitation KDRP Project (KDRP) Funding Source and Application Analysis56 Zambezi River Authority Annual report For the year ended 31 December 2018 The Directors submit their report together with the audited financial statements for the year ended 31 December 2018, which disclose the state of affairs and financial performance of Zambezi River Authority (the 'Authority'). Establishment and Functions The Zambezi River Authority (ZRA) was established as a corporate body on i October 1987 by parallel legislation in the Parliaments of Zambia and Zimbabwe under the Zambezi River Authority Acts No.17 and 19 respectively. It was tasked with the management of the Zambezi River, which flows between the two countries' common border. ZRA is also mandated to maintain the Rariba Dam Complex (Kariba Complex) and to construct and maintain other dams or infrastructure on the river forming the border between the two countries. Principal Functions The functions of the Authority are set out in the schedule to the Zambezi River Authority Acts of 1987 as follows: (a) Operate monitor and maintain the Kariba Complex. Kariba complex means: (i) the Kariba Dam and reservoir (ii) all telemetering stations relating to the Kariba Dam (iii) any other installations owned by the Authority (b) In consultation with the National Electricity Undertakings, investigate the desirability of constructing new damns on the Zambezi River and make recommendations thereon to the Council of Ministers ("the Council"); (c) Subject to the approval of the Council, construct, operate, monitor, and maintain any other dams on the Zambezi River; (d) Collect, accumulate and process hydrological and environmental data of the Zambezi River for the better performance of its functions and for any other purpose beneficial to the Contracting States; (e) In consultation with the National Electricity undertakings, regulate the water level in the Kariba reservoir and in any other reservoir owned by the Authority; (0 Make such recommendations to the Council as will ensure the effective and efficient use of the waters and other resources of the Zambezi; (g) Liaise with the National Electricity Undertakings in the performance of its functions that may affect the generation and transmission of electricity to the Contracting States; (h) Subject to provisions of Article 13, recruit employ and provide for the training of staff as may be necessary for the performance of its functions under the Agreement; (i) From time to time and subject to the approval of the Council, make such revision of salaries, wages, and other remuneration to its employees as it considers appropriate (I) Submit development plans and programmes to the Council approval; (k) Give effect to such directions, as may from time to time, be given by the Council; and Carry out such other functions as are provided for in the Agreement or are incidental or conducive to the better performance of its functions. I Zambezi River Authority Annual report For the year ended 31 December 2018 Place of Business (a)Head Office: Kariba House, 32 Cha cha Road, P.O. Box 30233, Lusaka, Zambia (b)Harare Office: Club Chambers, Nelson Mandela Avenue, P.O. Box 63o, Harare, Zimbabwe (c)Kariba Office: Administration Block, 21 Lake Drive, Pvt. Bag 2001, Kariba, Zimbabwe Results Year ended 31 December 2018 2017 ZMW'ooo US$'oooo ZMWooo US$'oo Revenue 281,704 25,812 186,647 19,378 Surplus for the year lo6,479 9,251 3 i,6o6 The surplus for the year has been added to the revenue reserve. Property, plant, and equipment The Authority purchased property, plant and equipment amounting to US$ 4.76 million (ZMW57.42 million) (2017 US$27.7 million (ZMW273.7 million)) during the year. In the opinion of the directors, the carrying value of property, plant and equipment is not more than their recoverable value. Average number of employees The total remuneration of employees during the year amounted to ZMW 11.92 Million (US 10.35 million (2017: ZMW99.2 million (US$ 10.3 million). The average number of employees was as follows: Month Number Month Number January 150 July 151 February 151 August 151 March 149 September 151 April 150 October May 150 November June 152 June 150 December 152 The Authority has policies and procedures to safeguard the occupational health, safety, and welfare of its employees. Related party transactions The Authority has a common enterprise relationship with Governments of the Republic of Zambia and Zimbabwe. Other related party relationships and material balances that the Authority has with its related parties are listed in Note 24 to the financial statements. 2 Zambezi River Authority Annual Report For the year ended 31 December 2018 Gifts and donations The Authority made the following donations to charitable organisations and events duri year. ng the 2018 2017 ZMWooo US$'ooo ZMW'ooo US$'ooo Donations and sponsorships 3,490 31 191 18 Breach of loan terms of agreement The Authority has a 30 year subsidiary loan agreement dated 20 August 2015 with the Government of the Republic of Zambia for a loan amount of UJSS 144 million to finance of the Kariba Dam Rehabilition Project. According to schedule 1 of this subsidiary loan agreement, the Authority is required to make repayments biannually. The Authority has defaulted on the loan repayments amounting to US$ 4,973,ooo having paid only USS 1,o05,00 fal 2018 against lSo 6,023,000 (principal USS 3,8oo,ooo and interest US$ 2,223,o0o) as per the subsidiary loan agreement between the Authority and the Government of Zambia, The repayments were due on i March 2018 and 1 September 2018. After year end, the Authority has failed to make the other payment of USS 2,983,000 (principal US$ 1,900,ooo, interest US$ t,y83,ooo) due on t March 2019. This is in contravention of section 3.041i) of Article III of the subsidiary loan agreement which states that repayments should not be delayed by more than 30 days from due date and failure of which the Government of Zambia has the right to cancel the loan agreement in accordance with Section 5.03 of Article V of the subsidiary loan agreement. The Authority has engaged both the Zambian and Zimbabwean Governments highlighting the challenges in settlement of the said obligation due to delayed payments from ZESCO Limited and failure to access the United States Dollars in Zimbabwe. The Council of Ministers has elected to resolve the Authoritys liquidity challenges to enable it to settle its obligation to the Zambian government. Retrenchment On 15 June 2018, the Council of Ministers ("The Council") approved the Authority's retrenchment plan which included termination of contracts of employvment and re-engagement of permanent, pensionable and contract employees. The retrenchment is an effort to ensure the Authority's long- term sustainability by containing its cost of employment. Subsequently on 28 January 2019, the Authority issued notice of termination of employment to all its employees effective February 2019 to 30 April 2019. The retrenchment is expected to cost the Authority US$ 13.5 million and is expected to result in annual savings of US$ 4.2 million. The savings would arise from effecting among other initiatives a 15% cut in basic salaries, abolition of allowances such as security, education, social tour, critical area, and reduction in transport and vehicle maintenance allowance and a reduction in entitlement for leave days. Introduction of the Real Time Gross Settlement Dollar ("RTGS Dollar") - Zimbabwe On 22 February 2019, the Government of the Republic of Zimbabwe issued Statutory Instrument SI No. 33 of 2019 (SI33) which introduced an electronic currency, the Real Time Gross Settlement Dollar ("RTGS Dollar"). The SI deemed for accounting and other purposes that all assets and liabilities that were valued in USD immediately before 22 of February 2019 to be valued in RTGS Dollars at a rate of i:. The RTGS dollar was valued at 1:i with the United States Dollar ("US") on the day of issue, and is tradable on the foreign exchange market with future exchange rates being determined by the market. 3 Zambezi River Authority Annual Report For the year ended 31 December 2018 Introduction of the Real Time Gross Settlement Dollar ("RTGS Dollar") (continued) This means that all the funds held in bank accounts other than Nostro FCA accounts and non- monetary assets and liabilities were designated as RTGS Dollar denominated at cco with the US. Consequently, the Authority's assets and liabilities in Zimbabwe were converted to RTGS dollars after year end. The Government of the Republic of Zimbabwe has however, issued a written committement to recognise the Authority funds held in banks in Zimbabwe as Nostro FCA in line with the provisions of the Water Purchase Agreement which requires the two Utilities to settle their obligations in United States Dollars. The letter has since been submitted to the Reserve Bank of Zimbabwe ("RBZ") for operationlisation of the government's directive. Risk management and control The Board, through the Audit, Corporate Governance and Risk Management Committee exercises oversight over Enterprise Risk Management (ERM) processes in the Authority. The Authority adopted IS031000:2oo9 as its framework for ERM. Using this framework, the Authority systematically identifies, analyses and responds to risks, including the mapping of interrelationships between risks. The Board accomplishes its oversight role through: (i) Developing Policies and procedures on risk management; (ii) Following up Executive Management's implementation of policies and procedures on risk management, (iii) Following up on assurance that risk management policies and procedures are working as intended; and (iv) Taking steps to foster a risk aware culture In the period under review the Audit, Corporate Governance and Risk Management Committee convened four (4) meetings as scheduled. The Authority manages risk under five (5) categories namely: Operational, Financial, Project Management, Strategic and Reputational risk. The significant risks dealt with by the Authority across the five (5) categories in the period under review included Credit, Liquidity, Dam safety, Hydrological, Protracted stakeholder approval and Funding withdrawal risks. (a) Operational risk Operational risk is in this instance the risk of dam failure due to operational deficiencies. The following are the significant risks noted under this category: (i) Dam Safety risk - This is the risk of compromise to the safety of Kariba Dam complex. To manage this risk the Authority has adopted international standards for dam maintenance and safety monitoring. Furthermore, the Authority is currently undertaking the Kariba Dam Rehabilitation Project aimed at securing the long-term safety and reliable operation of Kariba Dam Complex (ii) Hydrological Risk - This is a risk to the sustainable operation of the reservoir. The Authority continues to operate the reservoir in line with international best practice, Dialogue with the Power Utilities on the water usage is another migratory factor being employed by the Authority manage the Hydrological risk. 4 Zambezi River Authority Annual Report For the year ended 31 December 2018 Risk management and control (continued) (b) Financial risk The is the risk that the Authority will experience financial loss due to change in market conditions. The following are the significant risks noted under this classification: (i) Credit Risk - This is the risk that the Authority may be unable to collect what it is owed. This ranges from sales receipts to deposits and investments placed with financial institutions. (ii) Liquidity Risk - This is the risk that the Authority may fail to settle its obligations as and when they fall due. Liquidity risk is strongly correlated with credit risk and the consequence of it materialising can give rise to an exposure to reputational risk. The Authority continues to explore ways of tightening its credit control mechanisms, including lobbying the principal shareholders for preferred consideration by trade creditors. The Authority's financial risk exposures are discussed on pages 41 to 48 in Note 21 to the financial statements. (c) Project Management Risk This is this risk that a project may not be properly implemented or delayed. The Authority considered the risk of protracted stakeholder approval during the period under review. The risk emanates from the need to secure prior approval from financiers before proceeding to the next stage of any project related procurement. The Authority continues to interact with project financiers for quick turnaround time on all prior approvals. Any delay is obtaining prior approval affects subsequent processes relating to the project. (d) Strategic Risk This is the risk that the strategy may not be properly implemented. To manage this risk, the Authority has adopted a rational approach to Strategy formulation and performs a periodic evaluation of strategy implementation, (e) Reputational Risk This is the risk that adverse publicity will negatively impact the Authority's operations. To manage this risk, the Authority has a policy framework in place to manage all communication on its operations with existing and potential stakeholders. Governance Structure The Council of Ministers and directors who held office during the year and to the date of this report were: (a) Council of Ministers Name Title Hon. Joram M Gumbo Chairperson Resigned/Appointed Hon. Simon Khaya Moyo MP Chairperson Retired September 2018 Hon. Mathew Nkhuwa MP Co - Chairperson Appointed February 2018 Hon. David Mabumba MP Co - Chairperson Retired February 2018 Hon. Margaret D Mwanakatwe MP Member Appointed February 2018 Hon. Felix Mutati MP Member Retired February 2018 Hon. Prof. Mthuli Ncube MP Member September 2018 Hon. Patrick A Chinamasa MP Member Retired September 2018 5 Zambezi River Authority Annual Report For the year ended 31 December 2oi8 (b) Board of Directors Name Title Resigned/Appointed Dr. Gloria S. Magombo Chairperson Appointed September 2018 Mr. Patson I Mbiriri Chairperson Retired September 2018 Brigadier General Emelda Chola (Retired) Co-Chairperson Mr George T Guvamatanga Member Appointed September 208 Mr. Wilard L Manungo Member Retired September 2018 Mr. Mukuli Chikuba Member Mr. Pascal Mubanga Member Engineer Israel Rwodzi Member (c) Executive management Name Position Engineer. Munyaradzi C. Munodawafa Chief Executive Mr. Peter Kapinga Board Secretary/Corporate Services Director Mr Edward MX Kabwe Director - Finance Engineer. David Mazvidza Director - Projects & Dam Safety Engineer. Christopher Chisense Director - Water Resources & Environmental Management Auditor The auditor, PricewaterhouseCoopers, has indicated its willingness to continue in office and a resolution for its reappointment will be proposed at the next Council of Ministers Meeting. On behalf of the Board: Board Secretary Date 6 Zambezi River Authority Statement of directors' responsibilities For the year ended 31 December 2018 The Zambezi River Authority Act requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Authority as at the end of the financial year and of its financial performance. It also requires the Directors' to ensure that the Authority keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Authority. The Directors are also responsible for safeguarding the assets of the Authority. The Directors accept responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable estimates, in conformity with International Financial Reporting Standards and with the requirements of the Zambezi River Authority Act. The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Authority and of its financial performance in accordance with International Financial Reporting Standards. The Directors also responsible for such internal control, as the Directors determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. Nothing has come to the attention of the Directors to indicate that the Authority will not remain a going concern for at least twelve months from the date of these financials statements. Chairperson Co-Chairperson Date Date 7 pwc To the members of Zambezi River Authority Report on the audit of the financial statements In our opinion, Zambezi River Authority's (the "Authority") financial statements give a true and fair view of the financial position of the Authority as at 31 December 2018, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Zambezi River Authority Act. Zambezi River Authority's financial statements are set out on pages it to 53 and comprise: * the statement of income and expenditure and other comprehensive income for the year then ended; * the statement of financial position as at 31 December 2018; * the statement of changes in reserves for the year then ended; * the statement of cash flows for the year then ended; and * the notes to the financial statements, which include a summary of significant accounting policies. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Authority in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. The Directors' are responsible for the other information. The other information comprises the Authority's Annual Report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. PricewaterhouseCoopers. PwC Place, Stand No 2374, Thabo Mabeki Road, P.O. Box 30942 Lusaka, Zambia T +260 (211) 334000, F: +260(211) 256474 1. ,- -,- A list of Partners is available from the address above 8 pwc Report on the audit of the financial statements (continued) The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with international Financial Reporting Standards and the requirements of the Zambezi River Authority Act and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, the Directors are responsible for assessing the Authority's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Authority or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for overseeing the Authority's financial reporting process Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the annual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit 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 Authority's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. * Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Authority's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Authorityto cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit 9 pwe Report on other legal requirements The Zambezi River Authority Act requires that in carrying out our audit we consider whether the Authority has kept proper accounting records and other records and other registers required by this Act. In our opinion, based on our examination of those records the Authority has maintained proper accounting records and other records and registers as required by the Zambezi River Authority Act. PricewaterhouseCoopers 2019 Chartered Accountants Lusaka Charity Mulenga Practicing Certificate Number: AUD/Fooo945 Partner signing on behalf of the firn 10 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Statement of income and expenditure and other comprehensive income Year ended 31 December 2018 2017 Notes ZMW'ooo US$'ooo ZMW'ooo US$'ooo Revenue from contracts with customers 5 281,704 25,812 186,647 19,378 Other income 6 4,831 584 4,007 430 Fair value gain on financial assets through profit or loss 13 541 45 533 54 Reversal of impairment on financial assets 2,358 196 - - Depreciation on property, plant and equipment 9 (33,880) (3,526) (35,352) (3,753) Depreciation on investment property io (476) (39) (388) (39) Employee benefit expense 8 (110,917) (10,354) (99,221) (10,321) Governance costs (10,024) (909) (16,329) (1,672) Administration and travel costs (38,315) (3,556) (31,349) (3,274) Other operating expenses (7,236) (653) (10,705) (1,078) Results from operating activities 88,586 7,600 (2,157) (276) Finance income 7 19,500 1,792 18,81o 1,955 Finance costs 7 (1,607) (141) (714) (72) Surplus for the year io6,479 9,251 15,939 1,606 Other comprehensive income for the year Items that will be subsequently reclassified to profit or loss: -Exchange differences on translation 321,757 - (8,546) - -Impairment loss on revaluation (13,599) (1,128) - - Total other comprehensive income for the year 308,158 (1,128) (8,546)- Total comprehensive income for the year 414,637 8,123 7,393 1,606 rhe notes on pages 15 to 53 are an integral part of these financial statements. 11 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Statement of financial position Assets As at 31 December Non - current assets 2018 2017 Notes ZMW'ooo US$'ooo ZMW'ooo US$'ooo Property, plant and equipment 9 1,705,008 141,383 1,390,908 140,965 Investment property 1o 17,215 1,428 14,475 1,467 Long term investments 11 9,411 780 8,507 862 Other receivables 14 7,938 658 7,630 773 1,739,572 144,249 1,421,520 144,o67 Current assets Inventory 12 2,362 196 1,682 170 Financial assets at fair value through profit or loss 13 17,123 1,420 8,585 870 Trade and other receivables 14 318,261 26,391 239,487 24,272 Cash and cash equivalents 15 23,497 1,948 155,268 15,736 Restricted cash 16 292,612 24,264 - - 653,855 54,219 405,022 41,048 Total assets 2,393,427 198,468 1,826,542 185,115 Funds and Liabilities Revaluation reserve 993,393 82,374 848,384 85,982 Translation reserve 315,198 - 181,320 - Revenue reserve 539,889 70,906 424,470 61,395 1,848,480 153,280 1,454,174 147,377 Non - current liabilities and grants Borrowings 17 - - 21,165 2,145 Capital grants 19 374,063 31,018 287,494 29,137 Deferred capital grants 19 4,354 361 4,934 500 378,417 31,379 313,593 31,782 Current liabilities Borrowings 17 27,665 2,294 - - Trade and other payables 18 138,865 11,515 58,785 5,956 166,530 13,809 58,785 5,956 Total funds and liabilities 2,393,427 198,468 1,826,542 185,115 The financial statements on pages 11 to 53 were approved for issue by the board of directors on 2019 and signed on its behalf by: Chairperson Co - Chairperson The notes on pages 15 to 53 are an integral part of these financial statements. 12 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Statement of changes in reserves (ZMW) Revaluation Translation Revenue Total reserve reserve reserve reserves ZMW'ooo ZMW'ooo ZMW'ooo ZMW'ooo Balance at 1 January 2017 877,988 184,735 384,058 1,446,781 Surplus for the year - - 15,939 15,939 Other comprehensive income for the year Amortisation of revaluation reserve (24,473) - 24,473 - Exchange differences on translation (5,131) (3,415) - (8,546) Total comprehensive income for the year (29,604) (3,415) 40,412 7,393 Balance at 31 December 2017 848,384 181,320 424,470 1,454,174 Change of Accounting Policy - - (21,919) (21,919) Restated total equity as at 1 January 2018 848,384 18320 402,551 1,432,255 Surplus for the year - - 107,430 107,430 Other comprehensive income for the year - Amortisation of revaluation reserve (29,908) - 29,908 Revaluation Loss (13,599) - - (13,599) Exchange differences on translation 188,516 133,878 - 322,394 Total comprehensive income for the year 145,oo9 133,878 137,338 416,225 Balance at 31 December 2018 993,393 315,98 539,889 1,848,480 Statement of changes in reserves (US$) Revaluation Revenue Total reserves reserve Reserves US$'ooo US$'ooo US$'ooo Balance at 1 January 2017 88,463 57,309 145,772 Surplus for the year 1,606 i,6o6 Other comprehensive income for the year Amortisation of revaluation reserve (2,480) 2,480 Total comprehensive income for the year (2,480) 4,86 1,606 Balance at 31 December 2017 85,982 61,396 147,378 Balance as at 1 January 2018 Change of Accounting Policy - (2,220) (2,220) Restated total equity as at i January 2018 85,982 59,175 145,157 Surplus for the year - 9,251 9,251 Other comprehensive income for the year Amortisation of revaluation reserve (2,480) 2,480 - Revalutaion Loss (1,128) - (1 ,1 2 8 ) Total comprehensive income for the year (3,608) 11,731 8,123 Balance at 31 December 2018 82,374 70,906 153,280 The notes on pages 15 to 53 are an integral part of these financial statements. 13 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Statement of cash flows Year ended 31 December 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo Cash inflow from operating activities Operating results 107,430 9,251 15,939 1,606 Depreciation on property, plant and equipment 32,928 3,526 35,740 3,793 Deprciation on investment property 476 39 - - Reversal of impairment provision on financial assets (2,358) (196) - - (Profit) /loss on disposal of assets (2,640) (380) 389 41 Interest received (19,500) (1,792) (18,811) (1,955) Fair value gain on financial assets through profit and loss (541) (45) (533) (54) Increase in trade and other receivables (100,998) (4,225) (30,085) (3,178) Restricted cash (292,612) (24,264) - - Increase in inventory (680) (26) 115 11 Increase in trade and other payables 80,089 5,560 (103) 24 Cash generated from operations (198,406) (12,552) 2,652 288 Interest Received 19,500 1,792 18,810 1,954 Net cash (outflow)/ inflow from operating activities (178,906) (10,760) 21,462 2,242 Investing activities Purchases of property plant and equipment (57,415) (4,761) (273,709) (27,740) Proceeds from disposal of property plant and equipment 252 26 162 17 Proceeds from disposal of financial assets at fair value through profit or loss - - 289 29 Purchase of financial assets at fair value through profit or loss loss (7,996) (505) (1,735) (18o) Purchase of long term investments - - (1,973) (200) Net cash outflow from investing activities (65,159) (5,240) (276,966) (28,074) Financing activities Revenue Grants received 85,988 1,742 247,439 25,101 Proceeds from borrowings 14,462 1,199 7,224 861 Repayments on borrowings (13,217) (1,096) - - Net cash inflow from financing activities 87,233 1,845 254,663 25,962 Changes in cash and cash equivalents (156,833) (14,155) (840) 132 Effects of changes in exchange rates on cash held in foreign currencies 25,061 367 919 (32) Cash and cash equivalents at start of year 155,268 15,736 155,189 15,636 Cash and Cash equivalents at end of year 23,497 1,948 155,268 15,736 The notes on pages 15 to 53 are an integral part of these financial statements. 14 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 1 General information The Zambezi River Authority ("the Authority") is mandated to manage the Zambezi River, which flows between Zambia and Zimbabwe, the two contracting states' common borders. The Authority is also charged with the responsibility to maintain the Kariba Dam Complex (Kariba Complex) and construct and maintain other dams or infrastructure on the river forming the border between the two states. Its registered Head Office is: Kariba House 32 Cha Cha Cha Road P 0 Box 30233 Lusaka, Zambia. a Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) Basis of preparation The financial statements of Zambezi River Authority have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to entities reporting under IFRS and the requirements of the Zambezi River Authority Act. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The measurement basis applied is the historical cost basis, as modified by the revaluation of buildings and financial assets at fair value through profit or loss. The financial statements are presented in United States Dollars (US 8) and Zambia Kwacha ("ZMW" or "K") rounded to the nearest dollar or kwacha. In accordance with the Zambezi River Authority Act, the financial statements for the period ended 31 December 2018 have been approved for issue by the Directors. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the directors to exercise judgement in the process of applying the Authority's accounting policies. The areas involving a higher degree ofjudgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. b) Changes in accounting policy and disclosures (i) New and amended standards adopted by the Authority The Authority has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2018: The following standards had an impact on the Authority: 1. IFRS 9 Financial Instruments 2. IFRS 15 Revenue from Contracts with Customers The Authority has adopted IFRS 9 Financial Instruments as of 1 January 2018. The requirements of IFRS 9 represent a significant change from LAS 39 Financial Instruments: Recognition and Measurement. Additionally, the Authority adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures. 15 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (continued) b) Changes in accounting policy and disclosures (continued) (i) New and amended standards adopted by the Authority (continued) The details and quantitative impact of the changes in accounting policies are disclosed below: IFRS 9 -Financial instruments * IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income ("FVOCI") and fair value through profit and loss ("FVTPL"). The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, financial asset derivatives are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. Refer to the table below for a summary of the classification changes upon transition to IFRS 9. * Non-substantial modifications of financial liabilities are required to have a modification gain or loss recognized. This has resulted in no change in the carrying value of debt on transition. * IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI. Under IFRS 9, credit losses are recognized earlier than under IAS 39. An assessment was performed to determine the expected credit loss of financial assets - (Note 15). The Authority has also adopted consequential amendments to LAS 1 Presentation of Financial Statements which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCL Previously, the Authority's approach was to include any impairment of trade receivables in other expenses. The following table shows the original measurement categories under LAS 39 and the new measurement categories under IFRS 9 for each class of the financial assets as at January 1, 2018. Original classification New classification under under IAS 39 IFRS 9 Financial assets Trade and other receivable Loans and receivables Amortised cost Long term investments Loans and receivables Amortised cost Cash and cash equivalents Loans and receivables Amortised cost Financial assets at fair Financial assets at fair value through Financial assets at fair value value through profit or profit or loss through profit or loss loss Financial liabilities Trade and other payables Other financial liabilities Amortised cost Borrowings Other financial liabilities Amortised cost IFRS 9 was generally adopted without restating comparative information. The reclassifications and the adjustments arising from the new impairment rules are therefore not reflected in the restated balance sheet as at 31 December 2017 but are recognised in the opening statement of financial position as at 1 January 2018. 16 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (continued) (b) Changes in accounting policy and disclosures (continued) IFRS 15 Revenue from Contracts with Customers (i) New and amended standards adopted by the Authority (continued) The Authority has adopted IFRS 15 Revenue from Contracts with Customers as of January 1, 2018. In accordance with the transition provisions in IFRS 15, the Authority has elected to apply the new rules retrospectively whereby the transitional adjustment is recognised in retained earnings with no adjustment of comparatives. Therefore, the comparative information continues to be reported under IAS 18. There were no adjustments made to retained earnings as the changes in the rule have had no major impact in the way revenue is recognised. The Authority has elected to make use of the following practical expedients: Completed contracts under IAS 18 before the date of transition have not been reassessed. * The Authority applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have original expected duration of one year or less. IFRS 15 has had no material impact on the Authority's annual financial statements on i January 2018. Other amendments listed above did not have any material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. (ii) New standards and interpretations not yet adopted IFRS 16,'Leases'. After ten years of joint drafting by the IASB and FASB they decided that lessees should be required to recognise assets and liabilities arising from all leases (with limited exceptions) on the balance sheet. Lessor accounting has not substantially changed in the new standard. The model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a period of time and has an obligation to pay for that right. In response to concerns expressed about the cost and complexity to apply the requirements to large volumes of small assets, the IASB decided not to require a lessee to recognise assets and liabilities for short-term leases (less than 12 months), and leases for which the underlying asset is of low value (such as laptops and office furniture). A lessee measures lease liabilities at the present value of future lease payments. A lessee measures lease assets, initially at the same amount as lease liabilities, and also includes costs directly related to entering into the lease. Lease assets are amortised in a similar way to other assets such as property, plant, and equipment. This approach will result in a more faithful representation of a lessee's assets and liabilities and, together with enhanced disclosures, will provide greater transparency of a lessee's financial leverage and capital employed. One of the implications of the new standard is that there will be a change to key financial ratios derived from a lessee's assets and liabilities (for example, leverage and performance ratios). IFRS 16 supersedes LAS 17, 'Leases', IFRIC 4, 'Determining whether an Arrangement contains a Lease', SIC 15, 'Operating Leases - Incentives' and SIC 27, 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease'. The standard is effective for annual periods beginning i January 2019. Early adoption is permitted only if IFRS 15 is adopted at the same time. The Authority expects IFRS 16 to have an immaterial impact on its current accounting practices. Amendment to IAS 40, 'Investment property' -Transfers of investment property. These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence. The amendment is effective for annual periods beginning on or after 1 January 2019 17 Zambezi River Authority Financial Statements For the year ended 31 December 2018 2 Summary of significant accounting policies (Continued) (b) Changes in accounting policy and disclosures (Continued) (i) New standards and interpretations not yet adopted (continued) IFRS 16,'Leases' (continued) There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Authority. (c) Foreign currency translation (i) Functional and presentation currency The Authority's reporting currency is the United States Dollar and the Zambian Kwacha. The Authority as a bi national institution has operations in both Zimbabwe and Zambia and the presentation currency is in the respective currencies of the two countries which is United States Dollars (US$) and Zambia Kwacha (ZMW) respectively. The functional currency of the Authority is United States Dollars. Income statement items have been translated into presentation currency (Kwacha) using the average exchange rate for the year as an approximation to the actual exchange rate. Assets and liabilities have been translated using the closing exchange rate. Any differences arising from this process have been recognised in other comprehensive income and accumulated in the foreign exchange reserve in equity. Equity items have been translated at the closing exchange rate. Exchange differences arising on retranslating equity items and opening net assets have been transferred to the foreign exchange reserve within equity. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within 'finance income or cost'. All other foreign exchange gains and losses are presented in profit or loss within 'other income or expenses'. 18 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (continued) (d) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Authority's activities. The Authority identifies contracts with customers, the performance obligations within it, the transaction price, and its allocation to the performance obligations. Revenue is recognised when control of the product passes to the customer and is measured based on expected consideration. It is the Authority's policy to recognise revenue from a contract when it has been approved by both parties rights hare been clearly identified, payment terms have been defined, the contract has commercial substance, and collectability has been ascertained as probable. Collectability of customer's payments is ascertained based on the customer's historical records, guarantees provided, the customer's industry and advance payments made if any. Water Sales Revenue is a product of the following: I Water used as measured using flow meter equipment ( The agreed annual fixed charge " The variable charge Disaggregation of revenue from contract with customers The Authority derives revenue from one source i.e. sale of water to Kariba Hydro Power Company (KHPC) and ZESCO Limited (ZESCO). The Authority has determined that the disaggregation of revenue based on the criteria of type of products meets the revenue disaggregation disclosure requirement of IFRS 15 as it depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See further details in note 5. (e) Other income Other income is recognised on an accruals basis in accordance with the substance of the relevant agreements. (0) interest income Interest income is recognised using the effective interest method. (g) Rental income Rental income from properties is recognised in the profit or loss on a straight-line basis over the term of the relevant lease agreement. 19 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (Continued) (h) Property, plant, and equipment (Continued) Land and buildings are recognised at fair value based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. A revaluation surplus is credited to revaluation reserve. All other property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Construction work in progress is carried at cost and is not depreciated until the asset is brought into use. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Authority and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Increases in the carrying amounts arising on revaluation of buildings are recognised in other comprehensive income and accumulated in the revaluation reserve. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to profit or loss. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged to profit or loss and depreciation based on the asset's original cost is reclassified from the property, plant, and equipment revaluation surplus to revenue reserve. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows: Buildings 2.5% Kariba Dam Complex 2.5% Motor Vehicles 25% Equipment and Machinery 1o - 20% Furniture and Fittings 20% Computers 25% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Property, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are included in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (i) Investment Property Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Authority is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property. 20 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (continued) (i) Investment Property (continued) All investment property is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Authority and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Depreciation on investment property is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives over 40 years. Investment properties are derecognised when they have been disposed. If an investment property becomes owner-occupied, it is reclassified as property, plant, and equipment. Its fair value at the date of reclassification becomes its cost for subsequent accounting purposes. If an item of owner-occupied property becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is treated in the same way as a revaluation under IAS 16. Any resulting increase in the carrying amount of the property is recognised in income statement to the extent that it reverses a previous impairment loss, with any remaining increase recognised in other comprehensive income and increase directly to equity in revaluation surplus within equity. Any resulting decrease in the carrying amount of the property is initially charged in other comprehensive income against any previously recognised revaluation surplus, with any remaining decrease charged to profit or loss. (j) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average cost method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. (k) Financial Instruments The Authority adopted IFRS 9 Financial Instruments retrospectively on 1 January 2018, without restating comparative information. The Authority also adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosure. Accordingly, information relating to 31 December 2017 does not reflect the requirements of IFRS 9 but rather those of LAS 39. Financial instruments comprise trade and other receivables (excluding prepayments), financial assets at fair value through profit or loss, cash and cash equivalents, borrowings, other non-current liabilities (excluding provisions), derivatives and trade and other payables. Financial assets and liabilities are recognised in the Authority's statement of financial position when the Authority becomes a party to the contractual provisions of the instruments. All financial assets and liabilities are initially measured at fair value, including transaction costs except for those classified as at fair value through profit or loss which are initially measured at fair value, excluding transaction costs. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Financial assets are recognised (derecognised) on the date the Authority commits to purchase (sell) the instruments (trade date accounting). 21 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (Continued) (k) Financial Instruments (Continued) Financial assets and liabilities are classified as current if expected to be realised or settled within 12 months; if not, they are classified as non-current. (i). Offsetting financial instruments Offsetting of financial assets and liabilities is applied when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The net amount is reported in the statement of financial position. (ii). Financial instrument classification The Authority classifies financial assets on initial recognition as measured at amortised cost, or fair value through profit or loss on the basis of the Authority's business model for managing the financial asset and the cash flow characteristics of the financial asset. The Authority classifies its financial instruments into the following categories. (iii). Amortised cost The asset is held within a business model with the objective to collect the contractual cash flows; and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. Financial assets are not reclassified unless the Authority changes its business model. In rare circumstances where the Authority does change its business model, reclassifications are done prospectively from the date that the Authority changes its business model. Financial liabilities are classified as measured at amortised cost. (iv). Subsequent measurement Subsequent to initial recognition, financial instruments are measured as described below. Financial assets at fair value through profit and loss: These financial assets are subsequently measured at fair value and changes therein (including any interest or dividend income) are recognised in profit or loss. Financial assets at amortised cost: These financial assets are subsequently measured at amotised cost using the effective interest method, less any impairment losses. Interest income, foreign exchange gains and losses and impairments are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Financial liabilities comprise trade and other payables, borrowings, and other non-current liabilities (excluding provisions). All financial liabilities are subsequently measured at amortised cost using the effective interest method, (v). De-recognition Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the Authority has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when the obligations specified in the contracts are discharged, cancelled, or expires. 22 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (Continued) (k) Financial Instruments (. Substantial modification A substantial modification of the terms of an existing debt instrument or part of it is accounted for as an extinguishment of the original debt instrument and the recognition of a new debt instrument. Substantial modification (continued). Gains or losses arising from the modification of the terms of a debt instrument are recognised immediately in profit or loss where the modification does not result in the derecognition of the existing instrument. (ii). Impairment Under IFRS 9 the Authority calculates allowance for credit losses as expected credit losses (ECL's) for financial assets measured at amortised cost and contract assets. ECL's are a probability weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Authority expects to receive). ECLs are discounted at the original effective interest rate of the financial asset. The Authority applies the simplified approach to determine the ECL for trade receivables and contract assets. This results in calculating lifetime expected credit losses for trade receivables and contract assets. ECL for trade receivables is calculated using a provision matrix. Refer to note 15 for more detail about ECL and how this is calculated. (1) Trade receivables Trade receivables are amounts due from customers for services rendered in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are a classified as current asset. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. (m) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less. (n) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. 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 reporting period. 23 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (Continued) (n) Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred. (o) Trade payables These amounts represent liabilities for goods and services provided to the Authority prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 3o days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (p) Employee benefits (i) Retirement benefit obligations The Authority subscribes to defined contribution schemes for the benefit of its permanent and pensionable staff. The funds are managed by Prudential Insurance for the Zambian employees and Zimnat life Assurance for the Zimbabwean employees. Both funds are overseen by a Board of Trustees composed of management and employee representative trustees. A defined contribution plan is a pension plan under which the Authority pays fixed contributions into a separate entity. The Authority has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Authority's contributions to the defined contribution schemes are charged to profit or loss in the period to which they relate. The Authority has no further obligation once contributions have been paid. The Authority and all its employees also contribute to the appropriate National Social Security Funds in the two contracting states, which are defined contribution schemes. (ii) Termination benefits Termination benefits are payable when employment is terminated by the Authority before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Authority recognises termination benefits at the earlier of the following dates: (a) when the Authority can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. 24 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2 Summary of significant accounting policies (Continued) (q) Grants Grants are not recognised until there is reasonable assurance that the Authority will comply with the conditions attaching to them and that the grants will be received. Grants whose primary condition is that the Authority should purchase, or otherwise acquire non-current assets are recognised as capital grants in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Other grants are recognised as deferred revenue over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Compensations for expenses or losses already incurred or for the purpose of giving immediate financial support to the Authority with no future related costs are recognised in profit or loss in the period in which they become receivable. (r) Income tax The Authority is exempted from paying taxes on capital, income, or profit under Articles 17 and 19 of the Zambezi River Authority Acts, 1987 of Zambia and Zimbabwe respectively. As such no allowance is made for income or deferred taxes (s) Comparatives Where necessary, prior year comparatives have been reclassified in line with current year presentation. 3. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical estimates made include the following: Buildings The Authority owns land and buildings classified either as residential or commercial properties. The said properties are carried at valuation with the valuation exercise performed triannual. The valuation is conducted by professional external valuers, who apply various techniques that consider among other things: * Location * Value of surrounding properties * Impact of planned investments in the area The land and buildings were revalued using the sales comparison approach based on recent sales of comparable properties in the area. 25 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 4 Segmental Reporting The Authority operates in two geographical segments ie. Zambia and Zimbabwe. An operating segment is a component of the Authority for which discrete financial information is available; that engages in business activities (earns revenue, incurs expenses); and for which operating results are regularly reviewed to assess performance and to make resource allocation decisions (to the segment). The Authority currently derives its revenues from water sales to ZESCO Limited and Kariba Hydro Power Company (Pvt) Limited ("KHPC"). The Chief Executive is presented with the results of each segment for the purposes of resource allocation and assessment of the results of each segment. Water Sales Segment: The Operating income is based on water tariffs charged based on the water consumed in the generation of electricity as invoiced to the two utility companies, ZESCO Limited and Kariba Hydro Power Company (Pvt) Ltd. The formula used is intended to provide the Authority with sufficient revenues to carry out its mandate and not to generate profits. Segment information is presented in respect of the Authority's business. The primary format is based on the Authority's geographical segments and then on the management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income- earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period Year ended 31 December 2018 Amounts are Stated in ZMW'ooo Zambia Zimbabwe Consolidated Revenue 141513 140 191 281 704 Other income 25269 1961 27230 Segment income 166 782 142 152 308 934 Segment costs Board expenses 6048 3976 10024 Repairs and maintenance 31 267 28 754 6o 021 Staff costs 71320 39597 110 918 Other administration expenses 12 662 7 879 20 542 121298 80206 201 504 Net Surplus 45485 61945 107430 26 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 4 Segmental Reporting (continued) Year ended 31 December 2018 Amounts are Stated in US$'ooo Zambia Zimbabwe Consolidated Revenue 12 852 12960 25 811 Other income 22o4 413 2 618 Segment income 15 o56 13373 28429 Segment costs Board expenses 542 366 908 Repairs and maintenance 3113 2899 6 013 Staff costs 6643 3712 10354 Other administration expenses 1105 798 1903 11 403 7 776 19 179 Net surplus 3653 5597 9251 Year ended 31 December 2017 Amounts are Stated in ZMWooo Zambia Zimbabwe Consolidated Revenue 89,693 96,954 186,647 Other income 14,438 8,911 23,349 Segment income 104,131 105,865 209,996 Segment costs Board expenses 7,726 3,416 11,142 Repairs and maintenance 1,253 3,923 5,176 Staff costs 62,740 36,481 99,221 Other administration expenses 38,674 39,844 78,518 110,393 83,664 194,057 Net (deficit)/surplus (6,262) 22,201 15,939 27 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 4 Segmental Reporting (continued) Year ended 31 December 2017 Amounts are Stated in US$'ooo Zambia Zimbabwe Consolidated Revenue 9,282 10,096 19,379 Other income 1,510 939 2,449 Segment income 10,792 11,035 21,827 Segment costs Board expenses 1,306 353 1,659 Repairs and maintenance 124 4o6 530 Staff costs53 .c6,527 3,794 10,321 Other administration expenses 3,528 4,184 7,712 11,485 8,737 20,222 Net (deficit)/ surplus (693) 2,298 1,605 5 Revenue from contracts with 2018 2017 customers ZMW'ooo US$'ooo ZMVW'ooo US$'ooo Water Sales Variable Charge 211,578 19,262 123,607 12,829 Water Sales Fixed Charge 70,126 65550 63,040 6,550 281,70o 25,812 186,647 19,379 All the revenues of the Authority are recognised at a point in time. (a) Water sales The Authority uses a formula for the sale of water to ZESCO Limited ('ZESCO") and Kariba Hydro Power Company (Pvt) Limited ("KHPC") which was adopted in 1998. The formula was derived to ensure the costs associated with the operations of the Authority were covered by the fees charged to ZESCO Limited and KHPC (Pvt) Limited. The fees chargeable are contained in a tripartite Water Purchase Agreement signed between the Authority and the Utilities and are split between a fixed charge and a variable charge which is dependent on the cubic meters of water dispensed through the generators. In the year 2018, the Authority applied a 2% increment on the variable charge as per the agreement. The 2019 - 2021 Water Purchase Agreement was successfully completed and provides for a 2% annual upward adjustment on the Variable charge. 28 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 5 Revenue (continued) b) Water allocation During the year ended 31 December 2018, the Authority allocated a total of 45 bM3 of water to be shared equally between the Utilities for purposes of power generation. The Utilities' combined usage in the year was 43.14 bm3 resulting in underutilisation of 0.96 bM3. Accordingly, no over utilisation penalties have been levied on either Utility since none breached the 5% threshold. c) Over utilisation When there is over utilisation of water above annual base allocation, the following penalties apply; i. Over utilisation by up to 5% of annual allocation, no penalty shall be chargeable; ii. Over utilisation of up to 20% of annual allocation, extra volume shall be charged at a water tariff in USS/m3 x 1.5 iii. Over utilization by over 20% of annual allocation, extra volume shall be charged at a water tariff in USS/m3 X 2 6 Other income 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo Rent received from investment properties 1,419 135 2,209 243 Profit / (loss) on disposal of property, 2,640 380 (389) (41) plant, and equipment Miscellaneous income 345 30 1,927 201 Sale of data 2 - Toll fees 410 38 250 26 Plant hire charges 15 1 10 1 4,831 584 4,oo7 430 7 Finance income Finance income - Interest on overdue accounts 9,814 922 10,379 1,082 - Interest on term deposits 5,386 496 4,945 516 - Interest on staff housing loans 2,705 240 2,445 251 - Interest on staff car loans 1,595 134 1,o42 16 19,500 1,792 18,811 1,955 Finance cost - Exchange losses on cash and (1,607) (141) (714) (72) cash equivalents (1,607) (141) (714) (72) Net finance income 17,893 1,65 18,o97 L8,83 8 Employee benefits expense Salaries and wages 86,386 8,090 80,020 8,322 Pension 7,620 714 6,988 725 Gratuity 4,233 397 3,572 381 Other employment costs 12,78 1,153 8,641 894 110,917 10,354 99,221 10,321 29 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 9 Property, plant, and equipment Kariba Dam Land and Motor Capital Total Complex buildings vehicles, work in Furniture progress & fittings ZMW'ooo ZMW'ooo ZMW'ooo ZMW'ooo ZMW'ooo At 31 January 2017 Cost or valuation 1,120,763 97,967 100,134 221,296 1,540,160 Accumulated depreciation (186,992) (7,449) (61,o33) - (255,474) Effects of foreign exchange (99,954) (9,639) (4,567) (13,868) (128,028) difference Net book amount 833,817 80,879 34,534 207,428 1,156,658 Year ended 31 December 2017 Opening net book amount 833,817 80,879 34,534 207,428 1,156,658 Additions - - 2,863 270,846 273,709 Effects of foreign exchange (59) (599) (627) (1,212) (8,433) difference Disposals - (189) - (189) Transfers from investment properties - 4,915 (12) - 4,903 Depreciation charge (23,855) (2,639) (9,246) - (35,740) Closing net book amount 803,967 82,556 27,323 477,062 1,390,908 At 31 December 2017 Cost or valuation 1,120,763 104,775 100,349 492,143 1,818,030 Accumulated depreciation (211,969) (12,107) (68,263) - (292,339) Effects of foreign exchange (104,827) (10,112) (4,763) (15,081) (134,783) difference Net book amount 803,967 82,556 27,323 477,062 1,390,908 Year ended 31 December 2018 Opening net book amount 803,967 82,556 27,323 477,o62 1,390,908 Additions - - 6,447 50,499 57,416 Transfers from WIP - 469 - (469) - Scrapping/disposal - cost - (2,725) (1,600) - (4,325) Disposal - accumulated (299) 1,573 1,274 depreciation Elimination of depreciation on - 7,581 (315) - 7,266 revaluation Revaluation loss - (13,599) - - (13,599) Depreciation charge (22,049) (2,883) (8,948) - (33,880) Effects of foreign Exchange 170,010 18,347 6,046 1o6,oi5 300,418 differences Closing net book amount 951,928 89,447 30,526 633,107 1,705,008 At 31 December zo18 Cost or valuation 1,120,763 79,254 106,545 542,173 1,848,735 Accumulated depreciation (242,661) 1,960 (77,302) - (318,003) Effects of foreign Exchange 73,826 8,233 1,283 90,934 174,276 differences Net book amount 951,928 89,447 30,526 633,106 1,705,oo8 30 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 9 Property, plant, and equipment (continued) Kariba Dam Land Motor Capital Total Complex and vehicles work in buildings & progress Furniture & fittings As at 1 January 2017 US$'ooo US$'ooo US$'ooo US$'ooo US$'ooo Cost or valuation 101,152 8,843 9,079 20,900 139,974 Accumulated depreciation (17,140) (694) (5,6oo) (23,434) Net book amount 84,012 8,149 3,479 20,900 116,540 Year ended 31 December 2017 84,012 8,149 3,479 20,900 116,540 Additions - - 290 27,450 27,740 Transfers from investment properties - 498 (1) - 497 Disposal - (19) - (19) Depreciation charge 4(2531) (28028)998) - (3,793) Closing net book amount 81,481 8,367 2,767 48,S3 140,965 At 31 December 2017 Cost or valuation 101,152 9,533 9,101 48,350 168,136 Accumulated depreciation (19,671)_ (1,166) (6,334) - (27,171) Net book amount 81,481 8,367 2,767 48,350 140,965 Year ended 31 December 2018 Opening net book amount 81,481 8,367 2,767 48,350 140,965 Additions - - 535 4,187 4,722 Transfers from WIP - 39 - (39) - Scrapping/Disposal - Cost - (226) (133) - (359) Scrapping/Disposal - Accumulated depreciation - (25) 130 105 Revaluation Gain/(Loss) - (1,136) 112 - (1,024) Elimination of Depreciation on revaluation - 637 (138) 1 500 Depreciation charge (2,545) (239) (742) - (3,526) Closing net book amount 78,936 7,417 2,531 52,499 141,383 At 31 December 2018 Cost or valuation 101,152 7,417 9,615 52,499 170,683 Accumulated depreciation (22,216) - (7,084) - (29,300) Net book amount 78,936 7,417 2,531 52,499 141,383 Construction work in progress relates to Expenditure on the Batoka Hydroelectric Scheme project, the Kariba Dam rehabilitation project, ICT network overall and Kariba Dam information offices. 31 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 9 Property, plant, and equipment (continued) The Authorities' head office building and residential properties were revalued as at 31 December 2018 by respective Government Valuation Department independent professionally qualified valuers, who hold recognised relevant professional qualifications and have recent experience in the locations and segments of the properties valued. Valuations were based on Open Market Value approach based on current prices of similar properties. The key inputs under this approach are the price per square metre from current year sales of comparable lots of property in the area (location and size). It is the Authority's accounting policy to revalue properties after every three years If land and buildings were stated on the historical cost basis, the amounts would be as follows: 2018 2017 ZMWooo US$'ooo ZMWooo US$'ooo Cost 64,217 5,325 52,157 5,286 Accumulated depreciation (3,197) (265) (1,302) (132) 61,020 5,o60 50,855 5,154 1o Investment property At 1 January 2017 ZMWooo US$'ooo Cost 15,787 2,278 Accumulated depreciation (2,717) (274) Effects of foreign exchange difference 6,818 - Net book amount 19,888 2,004 Year ended 31 December 2017 Opening net book amount 19,888 2,004 Effects of foreign exchange difference (115) - Transfers to property, plant and equipment - cost (6,877) (696) Transfers to property, plant and equipment - accumulated depreciation 1,967 199 Depreciation charge (388) (39) Closing net book amount 14,475 1,467 Year ended 31 December 2017 15,727 1,581 Accumulated depreciation (1,138) (114) Effects of foreign exchange difference (114) - Net book amount 14,475 1,467 Year ended 31 December 2018 Opening net book amount 14,475 1,467 Depreciation Charge (476) (39) Effects of foreign exchange difference 3,216 - Closing net book amount 17,215 1,428 At 31 December 2018 Cost 15,727 1,581 Accumulated depreciation (1,614) (153) Effects of foreign exchange difference 3,102 - Net book amount 17,215 1,428 32 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 1o Investment property (continued) The investment property is carried at cost because their fair values cannot be reliably determined on a continuing basis. Comparable market transactions are infrequent and alternative reliable estimates of fair value are unreliable. This is due to the location of the investment properties. 11 Long term investments 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo At start of year 8,507 862 6,255 630 Additions - - 1,973 200 Interest earned 482 40 315 32 Interest redeemed (108) (io) - - Effects of exchange rates 1,874 - (36) - Gross carrying amount 10,755 892 8,507 862 Less impairment provision (1,344) (111) (1,o63) (108) At end of year 9,411 780 7,444 754 The long term investments are with Commercial Bank of Zimbabwe (CBZ) with an average tenor of 1o years and yielding a return of 5% per annum. 12 Inventory 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo Consumable Stores 2,362 196 1,682 170 Inventory comprises stock of consumables and other items held for use in the business. There were no significant differences between net realisable values and cost of inventories. 13 Financial assets at fair value through profit or loss 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo At start of the year 8,585 870 6,604 665 Additions 7996 505 1735 180 Fair value gain 541 45 533 54 Withdrawal . _ (289) (29) Effect of Exchange rate differences 1 - 2 - 17,123 1,420 8,585 870 The investment in Madison Asset Management Company (MAMCO) Limited is a short-term investment for gratuity for employees. The Authority has invested in 1,242,277 (2017: 783,048) units in unit trusts. The unit price of the unit trusts was US81.143 (2017: US$1.11). The return on the fund was US$44,873 (2017: US$53,982) for the year representing approximately 3%. 33 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 14 Trade and other receivables 2018 2017 ZMW'ooo US8'ooo ZMW'ooo US$'ooo ZESCO Limited 228,456 18,944 171,637 17,395 Kariba Hydro Power Company (KHPC) (1,352) (112) 32,590 3,303 Trade receivables 227,103 18,832 204,227 20,698 Less: Provision for impairment losses (25,704) (2,132) (2,140) (217) 201,399 16,700 202,087 20,481 Prepayments 103,943 8,619 22,993 2,330 Rental debtors 3,386 281 3,018 306 Sundry receivables 3,485 289 3,913 397 Staff debtors 13,985 1,160 15,6 1,531 124,799 10,349 45,030 4,564 326,199 27,049 247,117 25,045 Less: Long-term receivables Staff housing loans 6,802 564 6,249 633 Staff car loans 1,136 94 1,381 140 7,938 658 7,630 773 318,261 26,391 239,487 24,272 (i) Classification as trade and other receivables Trade receivables are amounts due from Utilities for water sales arising in the ordinary course of business. Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. If collection of the amounts is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 45 days and therefore are all classified as current, The Authority's other accounting policies for trade and other receivables are outlined below: (ii) Other receivables These amounts generally arise from transactions outside the usual operating activities of the Authority. Interest is not charged on these amounts and neither is collateral normally obtained. (iii) Staff debtors These relates to car and housing loans which carry interest rates of 6% and io% per annum respectively. As at year end, these have been fair valued using the market related interest rates for similar loans. (iv) Fair values of trade and other receivables Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value. 34 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 15 Cash and cash equivalents 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo Cash at bank and in hand 17,964 1,490 49,839 5,051 Short term investments 5533 458 105,429 io,685 23,497 1,948 155,268 15,736 In the statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. Cash flow information Amendments to IAS 7; Effective 1 January 2017, now require entities to explain changes in their liabilities arising from financing activities. This includes changes arising from cash flows (e.g. drawdowns and repayments of borrowings) and on cash changes such as acquisitions, disposals, accretion of interest and unrealized exchange differences. Below is the tabular presentation of the movements in the Authority's net debt movement reconciliation. In the year under review, USS 974,855 was drawn from the International Development Association ("IDA") World Bank US$ 75 million loan facility while US$ 224,334 was drawn on the_African Development Bank Group AFDF facility for US$ 39 million. 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo Cash and cash equivalents 316,1og 26,212 155,268 15,736 Reclassified to restricted cash 17 (292,612) (24,264) - - Liquid investments 17,123 1,420 8,585 870 Borrowings -repayable within one year is (27,665) (2,294) (424) (43) Borrowings repayable after one year - - (2,65) (2,145) Net debt 12,955 1,074 142,264 14,418 Cash and liquid investments 40,62o 3,368 163,853 16,6o6 Gross debt - fixed interest rates - - (21,589) (2,188) Gross debt - variable interest rates - - - - Net debt 40,620 8 368 142,264 14,418 35 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 15 Cash and cash equivalents (continued) ZMW'ooo Cash and Liquid Borrowings Borrowings cash investments within i after 1 year equivalent year Net debt as at 1 January 2017 155,189 6,605 - (12,744) Cash flows 987 1,776 (424) (8,496) Redemptions - (286) 424 - Foreign exchange adjustments (908) (43) - 75 Other noncash movements - 533 - Net debt as at 31 December 2017 155,268 8,585 (21,165) Cash flows 126,341 6,o90 - (14,462) Redemptions - - (555) 12,662 Foreign exchange adjustments 24,500 1,907 555 Other non-cash movements - 541 (4,703) Net debt as at 31 December 2018 306,io0 17,123 - (27,668) Cash and Borrowings US$'ooo cash Liquid within 1 Borrowings equivalent investments year after 1 year Net debt as at 1 January 2017 15,636 665 (1,284) Cash flows oo 180 (43) (861) Redemptions - (29) 43 Other noncash m ovem ents -54 - Net debt as at 31 December 2017 15,736 870 - (2,145) Cash flows 10,476 505 (1,199) Redemptions - (46) 1,050 Other non-cash movements - 45 46 - Net debt as at 31 December 2018 26,212 1,420 - (,294) Liquid investments comprise current investments that are held at fair value through profit or loss. 36 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements r6 Restricted cash and cash equivalents 2018 2017 ZMWooo US$'ooo ZMWooo US$'ooo Restricted cash and cash equivalent held in Zimbabwe 292,612 24,264 - - Restricted cash and cash equivalents refers to cash balances held in Zimbabwe. Whereas, the Authority can transact locally on the said balances using RTGS Dollar, it is unable to readily access United States Dollars for debt servicing and other foreign currency denominated obligations to contractors working on the various projects currently underway. 17 Borrowings 2o8 2017 Government of the Republic of Zambia ZMWooo US$'ooo ZMWooo US$'ooo At start of year 21,165 2,145 12,744 1,284 Draw downs World Bank IDA 11,756 975 7,224 861 AFDB Loan 2,705 224 Interest charged 553 46 22,497 2,280 Repayment (13,217) (1,096) (22,497) (2,280) Effects of Exchange differences 4,703 - 1,197 - At end of year 27,665 2,294 2,65 2,145 World Bank IDA In February 2015, the International Development Association ("IDA") made available to the Government of the Republic of Zambia ("GRZ") a credit facility worth US$75,000,000 for the rehabilitation of the Kariba Dam. In August 2015, the GRZ agreed to on-lend the proceeds of the credit to the Authority. The interest rates applicable are at 2% per annum on withdrawn amounts with a repayment period of 30 years, including a grace period of 2 years on repayment of the principal. In the year under review, the Authority drew US$ 974,855. USS 715,678 was paid directly to Stucky; the consultant engaged to provide Technical and Supervisory services to the KDRP and, USS 259,177 was paid directly through client connection to the panel of experts engaged on the same Project. African Development Bank Group AFDF The Authority also has a credit facility from the ADF through the GRZ amounting to US$ 39,000,000.00 for the rehabilitation of the Kariba Dam. The interest rates applicable are at 2% per annum, on withdrawn amounts. The repayment period is 30 years, including a grace period of 2 years on repayment of the principal. In the year under review USS 224,334 was drawn from this facility and applied towards Technical service and Supervision costs. 37 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 17 Borrowings Breach of the terms of loans agreement The Authority has a 30 year subsidiary loan agreement dated 20 August 2015 with the Government of the Republic of Zambia for a loan amount of US$ 144 million for the financing of the Kariba Dam Rehabilition Project. According to schedule 1 of this subsidiary loan agreement, the Authority is required to make repayments biannually. The Authority has defaulted on the loan repayments amounting to USS 4,973,000 having paid only US$ 1,o50,ooo in 2018 against USS 6,023,000 (principal US$ 3,800,000 and interest USS 2,223,000) as per the subsidiary loan agreement between the Authority and the Government of Zambia. 'he repayments were due on 1 March 2018 and 1 September 2018. After year end, the Authority has failed to make the other payment of US$ 2,983,000 (principal US$ 1,9oo,ooo, interest US$ 1,o83,000) due on i March 2019. This is in contravention of section 3.04(i) of Article III of the subsidiary loan agreement which states that repayments should not be delayed by more than 3o days from due date and failure of which the Government of Zambia has the right to cancel the loan agreement in accordance with Section 5.03 of Article V of the subsidiary loan agreement. The Authority has engaged both the Zambian and Zimbabwean Governments highlighting the challenges in settlement of the said obligation due to delayed payments from ZESCO Limited and failure to access the United States Dollars in Zimbabwe. The Council of Ministers has elected to resolve the Authority's liquidity challenges to enable it to settle its obligation to the Zambian government. Since the Authority is in default of the terms of the agreement, this loan has been reclassified to current liabilities in the statement of financial position. 18 Trade and other payables 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US'ooo Trade creditors 77 6 791 So Accruals 89,428 7,415 18,333 1,856 ZVDF Zambia 1,105 92 3,765 382 Sundry creditors 27 2 5 - Statutory liabilities 3,502 290 2,454 249 Employee benefits 44,727 3,710 33,437 3,389 138,865 11,515 58,785 5,956 The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. 38 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 19 Capital Grants The Authority has a total of four (4) grant finance facilities and they are briefly described below: a) Batoka Gorge Hydro - Electric Scheme (BGHES) The International Development Association (IDA) of the World Bank acting as administrator of the Co- operation in International Waters in Africa Trust Fund (CIWA) provided a grant of USS6,ooo,ooo to be drawn down on direct payment requests as well as reimbursements. The objective of the Project is to advance the preparation of the Batoka Gorge Hydro -electric Scheme and strengthen cooperation development within the Zambezi River Basin. Funds from this grant have been applied towards the updating of Engineering feasibility studies, Environment Impact Assessment studies and the Finance, Legal and Transaction Advisory contracts on the Batoka Hydro Electric Scheme. In the year 2018 USS 481,004 was disbursed towards engineering feasibility studies b) Kariba Dam Rehabilitation Project (KDRP) The Authority has three grant facilities for the KDRP as below: i. Swedish International Development Agency Trust Fund (SIDA) - The International Development Association acting as administrator of the Swedish International Development Agency (SIDA) Trust Fund provided a grant of a maximum of USS25,ooo,ooo to finance the rehabilitation of the Kariba Dam. The grant is to be accessed through direct payment requests as well as requests for reimbursements. In the financial year 2018 US$ 376,043 was accessed from this facility and applied towards Dam Break Analysis and Lidar Survey works on the Kariba Dam. ii. African Development Bank (AFDB) - On 20 February 2015, the AFDB availed a grant facility through the two contracting states i.e. Zambia and Zimbabwe for the financing of specific foreign payments on the Kariba Dam Rehabilitation project under the Transitional Support Facility (TSF). During the year ended 31 December 2018, US$ 282,647 was accessed and applied towards the technical services and supervisory consultancy on the KDRP. iii. European Union (EU) - The EU through the European Development Fund Bridging Facility has given the Authority through the Government Republic of Zambia (GRZ) a grant of up to EUR 74,ooo,ooo towards the rehabilitation of the Plunge Pool at the Kariba Dam. During the year ended 31 December 2018, US$ 602,359 was disbursed through direct payments under this facility. 39 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 19 Capital Grants (continued) (c) Movements in grants 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo (i) Movements in deferred grant At start of year 4,934 500 4,963 500 Received during the year: - International Development Association (CIWA) 10,712 1,o86 Transferred to capital grants (1,676) (139) (10,712) (1,086) Effects of foreign currency exchange differences 1,096 - (29) At end of year 4,354 336 4,934 500 (ii) Movements in capital grants At start of year 287,494 29,137 40,055 4,036 Received during the year African Development Bank 3,409 283 9,156 928 European Union 7,264 602 211,635 21,449 Swedish International Development Agency 4,535 376 16,170 1,638 (Sida) CIWA - World Bank 5,801 481 10,712 1,086 Transferred from deferred grants 1,676 139 - - Effects of Foreign Currency 63,884 - (234) Exchange Differences 63,884 - 1234) At end of year 374,063 31,018 287,494 29,137 (d) Amortisation of Grants All the projects currently being funded by grants are yet to be completed and are still being carried in work in progress and as such not being amortised to income yet. 40 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 2o Financial instruments by category 2018 2017 ZMW'ooo US$'ooo ZMW'ooo US$'ooo Financial assets at amortised cost Loans and receivables 11,166 926 16,142 1,635 Trade and other receivables (excluding pre-payments) 214,568 17,792 216,414 21,941 Cash and cash equivalents 23,497 1,948 155,268 15,736 Long term investments 10,755 892 8,507 862 259,987 21,558 396,311 40,174 Financial assets at fair value through profit or loss 17, 12 420 8,585 870 Other Financial liabilities at amortised cost Financial liabilities Borrowings - - 21,165 2,145 Trade and other payables (excluding statutory liabilities) 135,362 11,225 56,320 5,707 135,362 11,225 77,485 7,852 21 Financial risk management objectives and policies The Authority's activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Authority's overall risk management programme focuses on the assessment of the liquidity positions of key customers and the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance and position. Financial risk management is carried out by the finance department under policies approved by the Board of Directors. The policies are imbedded in the overall enterprise risk management policy of the Authority. Market risk (i) Foreign exchange risk The Authority primarily generates its revenue in United States Dollar but does from time to time meet some of its obligations in Zambian Kwacha and other major convertible currencies through payments for goods and services needed for the day to day operations. Foreign exchange risk arises when future recognised assets or liabilities are denominated in a currency that is not the entity's functional currency. Management's policy to manage foreign exchange risk is to hold foreign currency bank accounts which act as a natural hedge for meeting foreign currency denominated expenses. At 31 December 2018, if the Zambian Kwacha had weakened/strengthened by 4% (2017: 4%) against the United States Dollar with all other variables held constant, operating surplus and accumulated reserves for the Authority would have been ZMW 0.427 million (USSo.o37 million (2016: ZMW o.637 million US$o.o64 million) lower/higher, mainly as a result of ZMW dollar trade and other receivables, trade and other payables and bank balances. ii) Interest rate risk The Authority's interest rate risk arises from long-term borrowings contracted for the Kariba dam rehabilitation project. Borrowings issued at concessional fixed interest rates, but with a clause for default penalties expose the Authority's to cash flow interest rate risk. Management manages this risk by ensuring sufficient liquidity to meet loan obligations when they fall due. As at 31 December 2018, an increase/decrease of 200 (2017: 2oo) basis points on USS did not have a material impact on the operating surplus and accumulated reserves. 41 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (continued) Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposure to customers, including outstanding receivables. Risk management The Authority assesses the credit quality of each customer, taking into account its financial position, past experience, and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The utilisation of credit limits is regularly monitored. The compliance with credit limits by customers is regularly monitored by line management. For cash and cash equivalent balances, the Authority's exposure and credit ratings of counterparties are regularly monitored, and the aggregate value of transactions spread amongst approved financial institutions. The Authority actively seeks to limit the amount of credit exposure to any one financial institution and credit exposure is controlled by counterparty limits that are reviewed and approved by the Treasury. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' for International and regional banks with a local presence are accepted. The Authority has significant concentrations of credit risk as it has two main customers which are ZESCO Limited and KHPC. Impairment offinancial assets The Authority's financial assets that are subject to the expected credit loss model are trade and other receivables and Long term investments. Cash and cash equivalents is also subject to impairment requirements of IFRS 9 but the identified impairment loss was immaterial. The Authority applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all the trade receivables and long term investments. To measure the expected credit losses, trade receivables and long term investments have been grouped based on shared credit risk characteristics and days past due. The expected loss rates are based on the payment profiles of collections over a period of 36 month before 31 December 2018 or 1 January 2018 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. For long term investments, the expected credit loss has been based on the country risk premium since the individual banks do not have their own credit ratings. On that basis, the loss allowance as at 31 December 2018 and i January 2018 (on adoption of IFRS 9) was determined as follows for trade and other receivables and long term investments: 42 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (continued) Year ended 31 December 2018 Current More than More More than Total 45 days than 45 90 days days but less thango days (ZMW'ooo) Trade receivables Expected loss rate (%) 0.1063 0.1080 0.1090 0.3232 Gross carrying amount trade 19,544 19,247 17,934 171,731 208,912 Loss allowance 2,046 1,937 18,719 22,702 Other receivables Expected loss rate (%) 0.42 0.44 0.91 1.77 Gross carrying amount 64 109 3,212 3,386 Loss allowance 27 48 2,923 2,998 Total loss allowance -trade and other receivables 2,o7 1,985 1,644 25,706 Long term investment Expected loss rate (%) 0.125 Gross carrying amount 10,5 Loss allowance 1,344 Year ended 31 December 2018 Current More than More More Total 45 days than 45 than go days but days less thango days (US$'ooo) Trade receivables Expected loss rate (%) 0.1063 0.1080 0.1090 0.3232 Gross carrying amount 1,621 1,596 1,487 14,240 17,323 Loss allowance 170 161 1,552 1,882 Other receivables Expected loss rate (%) 0.42 0.44 0.91 1.77 Gross carrying amount 5 9 266 281 Loss allowance 2 4 242 248 Total loss allowance -trade and other receivables 172 165 1,794 2,131 Long term investments Expected loss rate (%) 0.1250 Gross carrying amount 892 Loss allowance 112 43 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (continued) Year ended 31 December 2017 Current More More than More Total than 45 45 days but than go days less than days go days (ZMW'ooo) Trade receivables Expected loss rate (%) 0.1063 0.1o8o 0.1090 0.3232 Gross carrying amount 15,740 15,807 19,626 153,054 188,488 Loss allowance 1,68o 2,120 16,683 20,483 Other receivables Expected loss rate (%) 0.42 0.44 0.91 1.77 Gross carrying amount 274 217 2,526 3,018 Loss allowance 115 95 2,299 2,509 Total loss allowance -trade and other receivables 1,795 2,215 18,982 22,992 Long term investments Expected loss rate (%) 0.125 Gross carrying amount 8,507 Loss allowance 1,o63 Year ended 31 December 2017 Current More More than More Total than 45 45 days but than days less than go go days days (US$'ooo) Trade receivables Expected loss rate (%) 0.1063 0.1080 0.1090 0.3232 Gross carrying amount trade 1,595 1,602 1,989 15,512 19,103 Loss allowance 170 215 1,691 2,076 Other receivables Expected loss rate (%) 0.42 0.44 0.91 1.77 Other receivables 28 22 256 36 Loss allowance 12 10 233 255 Total loss allowance 182 224 1,924 2,331 Long term investments Expected loss rate (%) 0.1250 Gross carrying amount 862 Loss allowance 108 44 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (continued) IFRS 9 was generally adopted without restating comparative information. The adjustments arising from the new impairment rules are therefore not reflected in the balance sheet as at 31 December 2017 but are recognised in the opening statement of financial position on 1 January 2018. The were no changes arising from the classification of the Authority's financial instruments. The closing allowances for the trade and other receivables and long term investments as at 31 December 2018 reconcile to the opening loss allowance as follows: 2018 2017 ZMWooo US$'ooo ZMW'ooo US$'ooo 31 December - calculated under IAS 39 2,152 217 2,152 217 Amounts restated through opening retained earnings 21,919 2,221 - - Opening loss allowance as at 1 January 24,071 2,438 2018 under IFRS 9 Impairment loss allowance recognised in (2,358) (196) profit or loss during the year Exchange differences 53- - As at 31 December 27,049 2,242 252 217 Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Authority, and a failure to make contractual payments for a period of greater than 120 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. Previous accounting treatment for impairment of trade receivables In prior year, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables which were known to be uncollectable were written off by reducing the carrying amount directly. The other receivables were assessed collectively to determine whether there was objective evidence that an impairment had been incurred but not yet been identified. For these receivables the estimated impairment losses were recognised in a separate provision for impairment. The Authority considered that there was evidence of impairment if any of the following indicators were present: -significant financial difficulties of the debtor -probability that the debtor will enter bankruptcy or financial reorganisation, and -default or delinquency in payments (more than 90 days overdue). Receivables for which an impairment provision was recognised are written off against the provision when there is no expectation of recovering additional cash. Liquidity risk Liquidity risk is the risk that the Authority will not be able to meet its financial obligations as they fall due. Prudent liquidity risk management includes maintaining sufficient cash balances, and the availability of funding from an adequate amount of committed credit facilities. The table below analyses the Authority's financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. 45 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (continued) Liguidity risk (continued) Less than Between i. Between Over 5 and 2 2 and 5 Total iyear years years years ZMWooo ZMWooo ZMWooo ZMWooo ZMWooo At 31 December 2018: - Borrowings 71,718 142,519 277,706 1,215,296 1,707,239 - trade and other payables 132,465 2,897 - - 135,362 204,188 145,416 277,706 1,215,296 1,842,601 At 31 December 2017: - Borrowings 59,429 118,io8 230,217 1,048,527 1,456,280 - trade and other payables 26,719 29,696 - - 56,320 86,148 147,709 230,217 1,048,527 1,512,600 Lessthan Between 1 Between Over 5 and 2 2 and 5 Total 1 year yearsyes years years US$'ooo US$'ooo US$'ooo US$'ooo US$'ooo At 31 December 2018 - Borrowings 5,947 11,818 23,028 100,775 141,568 - trade and other payables 10,985 240 - - 11,225 16,932 12,058 23,028 100,775 152,793 At 31 December 2017: - Borrowings 6,023 11,970 23,332 106,266 147,591 - trade and other payables 2,707 3,000 - 5,707 8,730 14,970 23,332 106,266 153,298 46 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (Continued) (d) Fair value estimation Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded equity) are based on quoted market prices at the close of trading on the reporting date. The carrying amounts of all financial assets and liabilities at the reporting date approximate their fair values. The following table presents the Authority s' assets that are measured at fair value: Level 1 Level 2 Level 3 Total Year ended 31 December 2018 ZMW'ooo ZMW'ooo ZMW'ooo ZMW'ooo Assets Financial assets Financial assets at fair value through profit or loss 17,123 - - 17,123 Non-financial assets Buildings - 89,441 8989,441 17,123 89,441 - 106,564 Year ended 31 December 2017 Assets Financial assets Financial assets at fair value through profit or loss 8,585 - 8,585 Non-financial assets Buildings - 82,556 - 82,556 8,585 82,556 - 91,141 Level 1 Level 2 Level 3 Total Year ended 31 December 2018 US'ooo US'ooo US'ooo US'ooo Assets Financial assets Financial assets at fair value through profit or loss 1,420 - - 1,420 Non-financial assets Buildings -7,417 -7,417 1,420 7,417 - 8,836 Year ended 31 December 2017 Assets Financial assets Financial assets at fair value through profit or loss 870 - - 870 Non-financial assets Buildings - 8,367 -8,367 870 8,367 - 9,237 47 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 21 Financial risk management objectives and policies (continued) (d) Fair value estimation (continued) The different level of fair value measurement hierarchy is described as follows: *Quoted prices(unadjusted) in active markets for identical assets (level 1) *Inputs other than quoted shares included in level 1 that are observable for the asset, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2) *Inputs for the assets that are not based on observable market data (that is, unobservable data) (level 3) All fair value measurements disclosed are recurring fair value measurements, required for the purposes of measuring the Authority's assets at fair value. During the year no transfers were made amongst the different levels. 22 Capital management The Authority's objectives when managing capital are to safeguard the Authority's ability to continue as a going concern. Adequacy of the capital of the Authority is maintained by the Authority on a regular basis. As and when required the Authority will through the respective Ministries responsible for Finance, source for funding in the form of loans and grants. 23 Contingent liabilities The Authority has some cases in the courts of law, most of which have already been decided in the Authority's favour and are only back in the courts on appeal by the plaintiffs. No contingent liabilities have been provided for as management believe that these are remote. 48 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 24 Related party transactions The Authority constituted by the Zombezi River Authority Act 1987 of Zambia and Zimbabwe, is a common enterprise between the Governments of the Republics of Zambia and Zimbabwe. Control of the entity is on a 50/50 basis with decisions being made by consensus. Oversight of the Authority is vested in the Council of Ministers (CoM). Internal supervision of its management and control of the affairs of the Authority, however, is vested in the Board and the key executive officers. The following transactions were carried out with related parties: 2018 2017 ZMW'ooo US$'ooo ZMW'ooo USS'ooo Directors compensation Director's fees and allowances 1,426 135 1,580 165 Other expenses 5,506 492 7,695 787 6,932 627 9,275 952 Key management compensation Salaries and other benefits 14,966 1,241 9,141 1,241 Pension contribution 3,871 321 3,183 321 18,837 1,562 12,324 1,562 Loans to key managements At start of year 2,894 240 3,891 324 Additions 140 12 690 70 Repayments (1,849) (153) (1,522) (154) At end of year 1,185 99 3,059 240 Amounts advanced and amounts owed to ZVDF ZVDF Receivable 2,203 183 1,865 194 ZVDF Payable (2,001) (166) (3765) (382) Net position at year end 202 17 (1,900) (188) Zambezi Valley Development Fund (ZVDF) is a trust established as a corporate social arm to mitigate the legacy effects on the communities that were displaced during the construction of the Kariba Dam. Zambezi River Authority operates as a secretariat to the ZVDF and together with the power Utilities pays 1% of its water sales revenue in support of the operations of ZVDF. 49 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 24 Related party transactions (Continued) 2018 2017 Water sales revenue ZMW'ooo US$'ooo ZMW'ooo US$'ooo ZESCO 141,513 12,852 89,693 9,282 KHPC 140,191 12,960 96,954 10,,96 281,704 25,812 186,647 19,378 Outstanding receivable balances from Water sales ZESCO 228,456 18,944 171,636 17,395 KHPC (1,352) (2) 32591 33303 227,104 18,832 204,227 20,698 25 Subsequent events (i) Breach of loan terms of agreement The Authority has a 30 year subsidiary loan agreement dated 2o August 2015 with the Government of the Republic of Zambia for a loan amount of US$ 144 million for the financing of the Kariba Dam Rehabilition Project. According to schedule 1 of this subsidiary loan agreement, the Authority is required to make repayments biannually. The first installment for 2019 was due on i March 2019 and the second installment is due on 1 September 2019. The Authority has defaulted on the first repayment for 2019 which was due on i March 2019 having failed to pay US$ 2,983,000 (principal US$ 1,900,ooo and interest US$1,083,ooo). This is in contravention of section 3.04(i) of Article III of the subsidiary loan agreement which states that repayments should not be delayed by more than 3o days from due date and failure of which the Government of Zambia has the right to cancel the loan agreement in accordance with Section 5.03 of Article V of the subsidiary loan agreement. The Authority has engaged both the Zambian and Zimbabwean Governments highlighting the challenges in settlement of the said obligation due to delayed payments from ZESCO Limited and failure to access the United States Dollars in Zimbabwe. The Council of Ministers has elected to resolve the Authority's liquidity challenges to enable it to settle its obligation to the Zambian government. (ii)Retrenchmcnt On 15 June 2018, the Council of Ministers ("The Council") approved the Authority's retrenchment plan which included termination of contracts of employment and re-engagement of permanent, pensionable and contract employees. The retrenchment is an effort to ensure the Authority's long-term sustainability by containing its cost of employment. Subsequently on 28 January 2019, the Authority issued notice of termination of employment to all its employees 2019 effective 1 February to 3o April 2019. The retrenchment is expected to cost the Authority USS 13.5 million and is expected to result in annual savings of US$ 4.2 million. The savings would arise from effecting among other initiatives a 15% cut in basic salaries, abolition of allowances such as security, education, social tour, critical area, and reduction in transport and vehicle maintenance allowance and a reduction in entitlement for leave days. 50 Zambezi River Authority Financial Statements For the year ended 31 December 2018 Notes to the financial statements 25 Subsequent events (continued) (iii) Introduction of the Real Time Gross Settlement Dollar ("RTGS Dollar") - On 22 February 2019, the Government of the Republic of Zimbabwe issued Statutory Instrument SI No. 33 of 2019 (S133) which introduced an electronic currency, the Real Time Gross Settlement Dollar ("RTGS Dollar"). The SI deemed for accounting and other purposes that all assets and liabilities that were valued in USD immediately before 22 of February 2019 to be valued in RTGS Dollars at a rate of i:i. The RTGS dollar was valued at r: with the United States Dollar ("USS") on the day of issue, and is tradable on the foreign exchange market with future exchange rates being determined by the market. This means that all the funds held in bank accounts other than Nostro FCA accounts and non-monetary assets and liabilities were designated as RTGS Dollar denominated at 1:1 with the US$. Consequently, the Authority's assets and liabilities in Zimbabwe were converted to RTGS dollars after year end. As per the Public Accountants and Auditors Board (PAAB) -Zimbabwe guidance issued on 21 March 2019, the Authority has prepared a sensitivity analysis showing the impact of the changes in the Zimbabwe currency on its assets and liabilities at the date of conversion to RTGS dollar. The official trading market rate of the US$ to the RTGS dollar was 1 USS :2.5 RTGS dollar. 51 4 G� � ti0 Gr �D � 1 �� ъ0 � 1�' � Е 90 :Ч . � b' �I *f 00 W `--' б�0 � � � � н � г ед � � � � � С` � :ц3 � N � � � � � � o�N � �v � � � � й й .� F, � +� � сс' � о � � � � �'��б �� `�3 h н UO 1 О i ,,{� i а� � Q {� CV � L'� С� � �q '�' [� � '� � ,ч: S ы {� . С�н �� СО � Q�0 С'� О С� О�О � СС? �t N Q � w tl' � � С7 СЛ � О N e�t `� � '� тti л" '•i .Л it' tYi н � � � N N � , `�, �н уЭ � О ! � � _..... ..__ _ о 1 `�о (j� � � 1 1 1 Р 1 1 1 1 1 ,�'у � � �� � ti о � . и �о �в �''� � � � � � � 1 fl' ��а Э W �i 1 �., si� {г/�), in а0 � i i i i i i i н ii � i�•1 .м Ь� � м� � С+'j о � � 4i �+ �, wM � ' �,�а�и��о�� й �5 � а � � � � о � а � � � � •� ��� � , ` � � i н i � i Е r°< о Lfa О о � •ь�i � CJ ,-�i � tp � � � F ~ � ^ � � � ��i� � � v N �` t�9 � � � •у р �.1 й �, и � CJ .~.i 1 и А i i i i � L�, рр 1,'.�.. г-� п r� г-� Е-+ © � �' ,� rл �' � °� v�, ; �, a�i и' �.+ й � � � � � О N � � +".в (/} � "�ы N 'i N Cf"� Lf7 � (� © !� '� v `'� `•-� '� О � � м� � 0 +.� � й I � � � �, � �� � о � �'йvа � 'S ����� ,� +; а� и ;; о й �� о� ��� и ц '�" � fZ+ оо '� а � .. � � г-+ �', N � � � � � � � Я �Л � 'I+ F' 0 , а�.� ._. а� q} � ��` `i :гi � . � '�" С.�.) и г� �? р� "' :? R�i � -� � fi� �,�� ' � .;� ь-�• .� � гц iU r� �. � ? 4'U ���. С�б С? ,и М �r +..ь ,ц � гд] � w � •U с�о � i� �"'м i.�ь ум .. р ..,.у . °'С� � ',� "г� � q} i�y � Q "� �.' � +•� С�б � �'" � iч � у � �i 4i р U; г� , ,ь`,�•, О Я�J � � 4�з � � .t; ..М � о � ���-' 4., r4ч �г `°э О ++ R's Q" •� й О О <�б v' 'J��I .� � е/� � � � ��.у � � ,�, Rн � � гs'' � ТЭ v 'С � �; ..� � �, �,, �у•f � L�" � �"ш С� � � � е: '�3 cr CNj 'v аз гП tц +, � � � � *•' +� • е�5 �} ;д ' , � v1 о гг� � � � +�+ ,� '� � +�+ � � с�'� � а�а п�з � 'С �ч � � � � � .� © о � � � � � � � О � С ,� � � с к� � Е� :\1 izг W `�i rЛ � V1 _ � N Zambezi River Authority Financial Statements For the year ended 3 1 December 20 18 Notes to the financial statements 25 Subsequent events (continued) The following are the assumptions underpinning the above analysis: (a) Property plant and equipment (PPE) held in Zimbabwe is non monetary RTGS Dollar denominated, while that held in Zambia is USD. Cb) Funds held in Zimbabwe are in RTGS Dollar while those held in Zambia are USD. (c) Trade and other receivables are monetary assets held at Nostro, FCA USD being mostly internal debtors considering the Authority operates in USD. (d) Authority monetary assets and liabilities held in Zambia are in USD. (e) Loans are grants contracted assumed to be on the Zambian statement of financial position and maintained in USD in accordance with the Financing Agreements. (f) That RTGS Dollar Exchange rates will average between 2.5 RTGS to 3 USD with the USD. 53 Zambezi River Authority Appendices For the year ended 31 December 2018 Appendix I - Statement of Capital Expenditure Compared to Budget Year ended 31 December 2018 Spent Budget Balance ZMW'ooo ZMW'ooo ZMWooo Kariba Dam Structure 6,331 6,331 CHAWP- Kariba Rehabilitation 36,614 485,395 448,781 CWIP- Batoka HES 11,472 48,931 37,458 Devil's Gorge - 181 181 Land & Buildings 849 15,535 14,686 Furniture, Fittings, Plant & Equip. 1,593 10,775 9,182 Motor Vehicles 4,434 7,827 3,392 ICT Infrastructure 2,452 34,515 32,63 57414 609,490 552,074 Spent Budget Balance US$'ooo US$'ooo US$'ooo Kariba Dam Structure 525 325 CWIP- Kariba Rehabilitation 3,036 40,250 24,000 CWIP- Batoka HES 951 4,057 7,021 Devil's Gorge - 15 15 Land & Buildings 70 1,288 986 Furniture, Fittings, Plant & Equip. 132 894 622 Motor Vehicles 368 649 405 ICT Infrastructure 203 2,862 1,177 4,760 50,540 34,551 The budget was approved by the Council of Ministers on Chairperson PricewaterhouseCoopers, Chartered Accountants Co-Chairperson Charity Mulenga Partner signing on behalf of firm Auditors Certificate In accordance with Article 15(6)6 of the Zambezi River Atthoritv Act 1987, we certify that the comparative statement shown above is correct. 54 Zambezi River Authority Appendices For the year ended 31 December 2018 Appendix II - Grant Funding Application Analysis - Batoka Gorge Hydro Electric Scheme Environmental Financial Engineering End Soal Legal and As at 31 December 2017 Feasibility and ia Transaction Total Studies Impact Advisory Consultancy Consultancy US$'ooo US$'ooo US$'ooo US$'ooo Cash Receipts: International Development Association Trust Fund- Cooperation in International 2,136 832 1,351 4,319 Waters in Africa (CIWA) grant Total Financing 2,136 832 1,351 4,319 As at 31 December 2018 Cash Receipts: International Development Association Trust Fund- CIWA 481 481 Grant Cumulative total 2,617 832 1,351 4,800 Financial Environmental Fiacl Engineering EndSo al Legal and As at 31 December 2017 Feasibility an oci Transaction Total Studies Impact Advisory Consultancy Consultancy ZMWooo ZMWooo ZMWooo ZMWooo Direct payments & Reimbursements International Development Association Trust Fund- CIWA 21,188 8,239 13,372 42,799 grant Total Financing 21,188 8,239 13,372 42,799 As at 31 December 2018 Cash Receipts: International Development Association Trust Fund- CIWA 5,801 5,801 Grant Effect of exchange differences 9,286 Cumulative total 26,989 8,239 13,372 57,886 The summary above does not form part of the audited financial statements 55 С � иг �� � еи � а� er с+�э �� а^� с� и 0 ���� N�+Gi ��о Nц��G� DO � � � � �j � ` � м т� r� � � N N си � � � � 1 1 N � 1 i 1 У t °ч м О !3А �+ Q � д' � LГ� � . � � � °Г Ct' о у � � С ;1 N N ��U � � р. а � � , �, , � � � � � с�'г а �^ � � r_ ,... � ^ у о ""� ri т� 4д FнЧ г,.�у '� � а� � � и �„ � � � г,.; �- � � � � ,� ..� ,� � � Q �� � � � 4г G � и � � � � �� � � � � � � i � i i i i � t� � � � ��� � � О м G А .F�м ��д �' й tfl � � �� � � � ы W � � а а �о Е� � � �,, � � �� ��q ,� � cv ос � �� � � о � � � м � н � ц� � �п +с� о fl � а ����й � � � � й � �`�с�� � � � � � ,�' о �г, '�+ '� � � с� ; � � � � � � с � � �.+ С ц' '� а N N � � N С} ~ ,рΡ-,.� � � � о � '` рq� ~ �Wц � х � ++ v �'' �' OQ �O '� , � , � �,',, н ,,, б� 'ы '�' � � N � � д ° `" р � �, � ¢`� и м �7 �` � � � � � г�, ^ � а � ° � � �. ,-, ° � � � �' � ++ с д � � � � о д` � � � �, � � � � м � аэ �, :а с� r� � � С7 �° 7 � ° � � �° С7 � ° � д� д � ww�,д й �w�, � � � � ����� � ����w �' "� � Е-� О U �."' 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