ZAMBEZI RIVER AUTHORITY 47$SE2 www,zaraho.org .zm HEAD OFFICE: HARARE OFFICE: KARIBA OFFICE: Kariba House 32 Cha Cha Cha RoadClbhaer 3ChChChRodNelson Mandela Avenue 21 Lake Drive P.0 Box 30233 Lusaka P.0 Box 630 Harare Pvt. Bag 2001 Kariba Zambia Zimbabwe Telephone: 228401/2, 227970/1 Telephone: 704031 Fax: 227498 Fa:005Fax: 2606 e-m ail : e -maail:co p rern zw wFax:h70rg35 e-l C ahabrasmwbo Lusaka Please reply to..................... ... Office Reference.........o M.........a . A 23 June 2017 The Country Director The World Bank Group Lusaka Dear Madam RE: SUBMISSION OF 2016 AUDITED FINANCIAL STATEMENTS The above captioned refers. We are glad to submit the attached set of audited 2016 Financial Statements for Zambezi River Authority as required by the financing agreements for both Kariba Dam Rehabilitation Project and Batoka Gorge HIES. Should you require any clarification, do not hesitate to contact us. Yours faithfully MUNYARADZI C. MUNODAWAFA CHIEF EX.CUTIVE ZAMBEZI RIVER AUTHnoaTY FINANCIAL STATEMENTS Fow THE YEAR ENDED 31- DECEMBER 2016 ZAMBEZI RIVER AuTHoRrry ANNrTAL Rgioiwr AN) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECFMBEIt 2016 CONTENTS PAGE Report of the Directors 1 Statement of Responsibilities for the Financial Statements 6 Report of the Independent Auditors 7 Statement of Income 11 Statement of Comprehensive Income 12 Statement of Changes in Funds 13 Statement of Cash Flows 14 Statement of Financial Position 15 Summary of Significant Accounting Policies 16 Notes to the Financial Statements 27 ÿþZAMEZi RVER AuTHmRuTY ANNUAL REPOR AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 REPORT OF THE DIRECTORS The Board of the Zambezi River Authority ("the Authority" or "ZRA") submits its report together with the financial statements of the Authority for the year ended 31W December 2016. . Establishment and Functions The Zambezi River Authority was estabished as a corporate body on 1s 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 boarder. ZRA is also mandated to maintain the Kariba Dam Complex (Kariba Complex) and to construct and maintain other dams or infrastructure on the river forming the border between the two countries. 2. Principal Functions The functions of the Authority are set out in the schedule to the Zambezi River Authoritv Acts of 1987as 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 dams 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; () 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 nocessary ror the performance of its functions under the Agrcmcnt; 1 ZAMBEZI RErn AUTHORIrrY ANNL. REPORT AND FNANCIAL STATEMENTS FoR THE YEAR ENDED 31 DECEMBER2016 () 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; (j) 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 (1) Carry out such other functions as are provided for in the Agreement or are incidental or conducive to the better performance of its functions. 3. Place of Business (a) Head Office: Kariba House, 32 Cha Road, P.O. Box 30233, Lusaka, Zambia (b) Harare Office: Club Chambers, Nelson Mandela Avenue, P.O. Box 630, Harare, Zimbabwe (c) Kariba Office: Administration Block, 21 Lake Drive, Pvt. Bag 2001, Kariba, Zimbabwe 4. Capital The Authority has no subscription capital; its capital resources comprise mainly of accumulated funds. 5. Operating Surplus (In ZMW'000 and USs'000) The operating surplus for the year amounted to ZMW72,165 (US7,271) ((2015: ZMW73,937 (US$6,673)). 6. Capital Expenditure (In ZMW'O0O and US$'000) The capital expenditure for the year amounted to ZMW93,267 (US9,397) ((2015:- ZMW63,027 (US$5,688)). 7. Risk Factors The Authority faces a number of operational, legal and financial risks in its operations: () Operational Risk Operational risk is the risk of losses from inadequate or failed internal processes and systems, caused by human error or external events. It has a broad scope and includes transaction a uthorisa tion and pmcessing, completeness of income recording, payments processing and the management of information. data quality and records. The following are the main risks noted under this classification: (i). Minancial Grime Risk - Financial crime risk is the risk that the Authority suffers losses as a result of internal and external fraud or intentional damage, loss or harm to people, premises or its moveable assets. The risk in the Authority is directly attributable to its people risk. 2 ZAMBEZL RIVER AuTrnoiTy ANNUAL. REPORT AND FINANCIAL STATEMENTS FoR THE YEAR ENDED 31 DECEMBER 2016 (ii). People Risk - People risk arises from failures of the Authority to manage its key risks as an employer, including lack of appropriate people resource, failure to manage performance and reward, unauthorised or inappropriate employee activity and failure to comply with employment related requirements. (b) Legal Risk The Authority is subject to a comprehensive range of legal obligations, mostly covered by the Zambezi River Authority Acts of 1987 As a result, it is exposed to many forms of legal risk, which may arise in a number of ways: its business may not be conducted in accordance with requirements of the Act; contractual obligations may either not be enforceable as intended or may be enforced against the Authority in an adverse way; the Authority may face risk where legal proceedings are brought against it, in the course of carrying out its mandate, etc. Regardless of whether such claims have merit, the outcome of legal proceedings is inherently uncertain and could result in financial loss. Defending legal proceedings can be expensive and time-consuming and there is no guarantee that all costs incurred will be recovered, even if the Authority is successful. (c Reporting Risk (i). Mnanaial Reporting Risk - Financial reporting risk arises from a failure or inability to comply fully with regulations or codes in relation to the preparation, presentation or disclosure of financial information. Non-compliance could lead to damage to reputation or, in extreme cases, withdrawal of external funding- (ii), Accounting Risks - The Authority's future performance and results could be materially different from expected results depending on the outcome of certain potential risks and 'uncertainties, details of which are discussed above. The reported results of the Authority are also sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. Details of its critical accounting policies and key sources of accounting judgments are included on pages 15 to 24. (iii). .Fnancial Risks - The Authority through its normal operations is exposed to a number of risks on its financial instruments, the most significant of which are credit and liquidity. Market (currency and interest) risks are generally low. The two main risks on its financial instruments are generally deemed to be within manageable limits. The Authority's financial risk exposures are discussed on pages 40 to 43 in Note 15 to the financial statements. 8. Risk Management and Control As explained on Statement 6 above, the Authority through its normal operations is exposed to a number of risks, the most significant of which are operational, legal and financial risks. The Board is responsible for establishing and ensuring maintenance of adequate internal controls over financial reporting. However, all internal control systems, no matter how well designed, have inherent Limitations Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 3 ZAmBEZI RIvER AuTmonRry ANNUAL REP(ORT AND FINANCIA1L STATEMENTS FogTH YEAR ENDED 31. DECEMBER 2016 9. Governance Structure (a) Council of Ministers Name Title Hon. Dr. Samuel Undenge MP Chairperson Hon. Dora Siliya NIP Co-Chairperson (Retired 2016) Hon. David Mabumba MP Co-Chairperson Hon. Patrick A Chinamasa MP Member IHon. Alexander B Chikwanda NIP Member (Retired 2016) Hon. Felix Muta[i Member (b) Board Name Title Mr. Patson I Mbiriri Chairperson Brig. Gen. imelda Chola (Retired) Co-Chairperson Mr. Wilard L Manungo Member Mr. Mukutulu Sinyani Member Mr. Pascal Mubanga Member Dr. Ronald Simiwnga Member Eng. Israel Rwodzi Member (c) Directors Name Position Eng- Munyaradzi C. Munodawafa Chief Executive Mr. Peter Kapinga Board Secretary/Corporate Services Director Mr Edward M. Kabwe Director - Finance Eng. David Mazvidza Director - Projects & Dam Safety Director - Water Resources & Eng. Christopher Chisense EvrnetlMngmn Environmental Management 10. Employees As at 31W December 2016 the number of staff employed at the Authority was 152. 11. 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 16 to the financial statements. 12. Post Balance Sheet Events There have been no significant events between the year-end and the date of approval of these financial statements. ZAMBEZi RIvER AuTHoRMrY ANNT'AL REPORT AND FINANCIAL STATEMENTS FOR TiE YEAR ENDIM 31 DECEMBER 2016 13. Auditors EMM Corporate Partners rb of the Board: Aithority Secretary Date 5 ZAMBEZI RivER AuTHomw ANNUAL REPORT AND FINANCI AL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 STATEMENT OF RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS The following statement, which should be read in conjunction with the Auditors' report on page 6, is made with a view to distinguishing the respective responsibilities of the Board of the Zambei River Authority ('the Authority") and of the auditors in relation to the financial statements for the year to 31 t December 2016- Statement of Responsibility for Financial Statements In conformity with International Financial Reporting Standards ('IFRSs', the Board are required to prepare financial statements for each financial year, which give a true and Fair view of the state of affairs of the Authority and of the operating result for that year. IFRSs provide, in relation to such accounts, that references to accounts giving a true and fair view are references to fair presentation. The Board considers that, in preparing the financial statements on pages 11 to 15, and the additional information contained on pages 16 to 48, the Authority has used appropriate accounting policies, supported by reasonable judgements and estimates, and all accounting standards which it considers to be applicable. The Board has responsibility for ensuring that the Authority keeps accounting records which disclose with reasonable accuracy the financial position of the Authority and which enable it to ensure that the financial statements comply with generally accepted reporting standards and with the Zambezi River Authority Acts of 1987 The Board has general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Authority and to prevent and detect fraud and other irregularities. The Board accepts responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable estimates, in conformity with IFRSs. In preparing such financial statements, the Board is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether the applicable accounting standards have been followed; and comply with IFRSs. In the opinion of the Board: 1. The statement of comprehensive income is drawn Lip so as to give a true and fair view of the result of the Authority for the year ended 31l December 2016; 2. Based on current records that it holds: (a) The statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Authority as at 3Pt December 2016 and (b) There are reasonable grounds to believe that the Authority will be able to pay its debts as and when they fall due- Accordingly, the financial statements set out on pages 10 to 14 were approved by the Board and signed on its be f by: Chairperson Co-Chairperson 20* DG 7Q2OD&-I7 Date Date 6 EMM Corporate Partners CJ Chartered Accouxtants and Management Consultants E M M A A MEMBER OF CPAAl-EMEA 5868 Kasiya Crescent ~ flf AAEKalundu C PA A1 CPA Associates International (CPAAI) is a worldwide po Box 31296 CPA ASSOCIATS INTE-RNATIAL association of accounting and consulting firms with its head Lusaka office in New York, USA- EMM is a proud CPA Associate of the Tel (260) 211291550 Europe, Middle East and Africa (EMEA) region of CRA.I. Call: (260) 955 433 710 Fax' (260) 211 291 550 E-mail: rnunc.+oannet'cn REPORT OF THE INDEPENDENr AUDITORS Opinion on Vmancial Statements We have audited the financial statements of the Zambezi River Authority ('the Authority"), which comprise the statement of financial position as at 311^ December 2016, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is Zam bezi River Authority Acts of 1987 and International Financial Reporting Standards 01FRS) as issued by the International Accounting Standards Board ("IASB"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Zambezi River Authority ('the Authority") as at 31st December 2016, and its financial performance and their cash flows for the year then ended. Separate Opinion in relation to IFRS as issued by the LASB The Authority has prepared Financial Statements that comply with IFRS as issued by the IASB. In our opinion, the Financial Statements comply with IFRS as issued by the IASB. Basis for Opinion 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 Statemenis section of our report. We are independent of the entity within the meaning of relevant ethical requirements and have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements- Key audit matters are selected from the matters communicated with those charged with governance. but are not intended to represent all matters that were discussed with them. Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole. Our opinion on the financial statements is not modified with respect to any of the key audit matters described below, and we do not express an opinion on these individual matters. 7 EMM EMM Corporate Partners 1. Va ltion of Fin ancial lnstornents The entity's disclosures about its structured financial instruments are included in Note 15. The entity's investments in structured financial instruments represent a small percentage of the total amount of its financial instruments. Because the valuation of the entity's structured financial instruments is based on amortised cost, there is low significant measurement uncertainty involved in this valuation. Our audit procedures included, among others, testing managemen's controls related to the classification and valuation of investments and assessment of any impairment losses likely to occur. I Grant Accounting Grants are not recognised until there is reasonable assurance that the Association will comply with the conditions attaching to them and that the grants will be received. 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. Our audit procedures also included, among others, testing management's controls related to the classification of and disclosure of grants and confirming that management had determined it was not necessary to make any adjustments to the reported amount to reflect the assumptions that similar entities would use in similar circumstances. 3. Capital Work in Progres As described in Note 4, the costs of construction of buildings is accounted for as Construction Work-in Progress, which is a long-term asset account in which the costs of constructing long-term assets are recorded. The account Construction Work-in-Progress will have a debit balance and will be reported on the statement of financial position as part of an entity's Property, Plant and Equipment. The costs of a constructed asset are accumulated in the account Construction Work-in-Progress until the asset is placed into service. When the asset is completed and placed into service, the account Construction Work-in- Progress will be credited for the accumulated costs of the asset and will be debited to the appropriate Property, Plant and Equipment account. Depreciation begins after the asset has been placed into service. We focused on this transaction because it is material to the financial statements as a whole and the fact that it is likely that when the building is complete, independent market valuations will have to be performed under the cost model. In addition, determining the assumptions that underlie the initial accounting and the useful lives associated with the acquired intangible assets involves significant management judgment given the nature of the entity. 4. Revaluations The Authority carried out revaluations on its land and buildings. All asset revaluations should comprise both cost adjustments and depreciation write backs, in line with IAS 16. Adjustments arising on restatement of accumulated depreciation should form part of the movement in carrying amount and the revaluation reserve should be amortised by transfer of the excess depreciation from revaluation reserve to revenue reserves as at the end of each accounting period that the asset was still in use. In addition to testing the controls the entity has put in place over its process to enter into and record effects of revaluations and other audit procedures, we considered it necessary to confirm the bases of revaluations and the rates of amortisations by testing journal entries made by management related to transaction. Based on the audit procedures performed, we did not find evidence of material misstateinent. Going Concern The financial statements of the entity have been prepared using the going concern basis of accounting. The use of this basis of accounting is appropriate unless management either intends to liquidate the entity or to cease operations, or has no reahatic alternative but to do so. As part of our audit of the 8 EMM EMM Corporate Partners financial .statements, we have concluded that managements use of the going concern basis of accounting n the preparation of the entity's financial statements is appropriate. Management has not identified a material uncertainty that may cast significant doubt on the entity's ability to continue as a going concern. and accordingly none is disclosed in the financial statements of the entity. Based on our audit of the financial statements of the entity, we also have not identified such a material uncertainty. However, neither management nor the auditor can guarantee the entity's ability to continue as a going concern. Responsibilities of Management and Those Charged With Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with IFRS&, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board is responsible for overseeing the entity's financial reporting process. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibilities for the Audit of the Financial Statements The objectives of our audit 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 financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit. We also: 1. Identify and assess the risks of material misstatement of tbe 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. 2. 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 entity's internal control. 3. Conclude on the appropriateness of managements 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 entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditors' 9 EMM EMM Corporate Partners report to the related disclosures in the consolidated 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 auditors' report. However, future events or conditions may cause the entity to cease to continue as a going concern. 4. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the entity audit. We remain solely responsible for our audit opinion. 7. We are required to communicate with the Board 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. 8. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Legal and Regulatory Requirements The ZambeziRiver Authority Acts of 1987 which defines the applicable reporting framework for these financial statements, requires that in carrying out our audit we consider whether the Authority has kept the accounting records, other records and registers required by this Act. We confirm that in our opinion the accounting records, other records, and registers required by the Act have been kept by the Authority, so far as appears from our examination of those records. Emphasis of Matter Because corresponding financial statements of Zambezi Valley Development Fund, a related party, with whom period-end balances were not reviewed by us, the ultimate impact of related party transactions on these financial statements may be unknown. However, our opinion is not qualified in this respect. The engagement partner responsible for the audit resulting in this independent auditor's report is: Elasto Mambo PC/MPC: 000236 EMM CORPORATE PARTNERS 21st June 2017 Chartered Accounlants and Management Consultants Date 10 EMM ZAMBEZi RIVER AUTHior ANNUAL REPORr AND FINANCIAL STATEMENTS FoR THE YEAR ENDED 31 DECEMBER 2016 STATEMENT OF INCOME 31 December 31 December Note 2016 2015 ZMW'000 ts$oc ZNWooo USo000 INCOMING RESOURCES Income from Operating Activities Revenue 3. 260,601 25,147 224,858 25,822 Non-Operating Income Other Income 4. 17,230 1,663 23,930 1,662 Total Incoming Resources 277,830 26,810 248,788 27,484 RESOURCES EXPENDED Depreciation 6. 37,837 3,651 31,211 3,584 Employee Costs 106,722 10,259 91,779 10,482 Operational Costs 61,189 5,637 51,697 6,726 Loss on Disposal of Non-current Assets - - 123 14 Finance Costs - - 40 5 205,747 19,547 174,851 20,811 Surplus 72,083 7,263 73,937 6,673 Other Compehensive Income: Total Comprehensive Income 72,083 7,263 73,937 6,673 Total surplus attributable to: Controlling interests 72,083 7,263 73,937 6,673 Non-controlling interests 72,083 7,263 73,937 6,673 11 ZAMBEZI RIVER AuTHORITY ANNUAL REPORT AND FINANCIAL STATEMENTS Fou THE YEA?R ENDED 31 DECEMBER 2016 STATEMENT OF COMRE,HENSIVE INCOME 31 December 31 December 2016 2015 ZMW'000 US$'000 ZMW000 US$'000 Surplus 72,083 7,263 73,937 6,673 Other Comprehensive Income; Items that will not he subsequently reclassified to profit and loss: Revaluation Adjustment-Cost - - 39,411 3,557 Revaluation Adjustment-Depreciation Write -14,919 1,346 Back Revaluation Adjustment-Investment Property - - 2,871 259 Depreciation Write Back on Investment Property - - 5,586 504 Revaluation Reserve: Amortisation on - - (2,176) (196) Depreciation Write Back Revenue Reserves- Amortisation on Depreciation - - 2,176 196 Write Back Revaluation Reserve: Amortisation of (24,617) (2,480) (27,482) (2,480) Revaluation Reserves Revenue Reserve: Amortisation of Revaluation 24,617 2,480 27,482 2,480 Reserves Items that may be subsequently reclassified to profit and loss: Exchange Difference Arising During the Year (159,977) - 590,598 - Total Comprehensive Income (87,895) 7,263 727,320 12,340 Ttal comprehensive income attributable to- Controlling interests (87,896) 7,263 727,320 12,340 Non-controlling interests (87,895) 7,263 727,320 12,340 12 ZAMBEZI RIVER AUTmOYITY ANNUAL REPORT ANT) FINANCIAL STATEMENTS FoR Tii YEAR ENDED 31 DEEMCBER 2016 STATEMENT OF CHANGES IN FUNDS Revaluation Revenue Total Amounts in Zambian Kwacha (ZMW'000) Reserves Reserves equity Balance at 1 January 2015 562,809 244,547 807,356 Surplus (Deficit) for the Year - 73,937 73,937 Other Comprehensive Income for the Year Effects of Foreign Currency Exchange Differences 411,707 178,891 590,598 Other Comprehensive Income for the Year Revaluation Adjustment-Cost of Property 39,411 - 39,411 Revaluation Adjustment-Depreciation Write Back on 14,919 - 14,919 Property Revaluation Adjustment-Investment Property 2,871 2,871 Depreciation Write Back on Investment Property 5,586 - 5,586 Amortisation on Depreciation Write Back (2,176) 2,176 - Amortisation of Revaluation Reserve - Dam Wall Complex (27,482) 27,482 - Total Comprehensive Income 444,835 282,485 727,320 Total changes 444,835 282,485 727,320 Balance at 1 January 2016 1,007,644 527,032 1,534,676 Surplus (Deficit) for the Year - 72,083 72,083 Other Comprehensive Income for the_Year Effects of Foreign Currency Exchange Dilferences (129,656) (30,322) (159,977) Other Comprehensive Income for the Year - Total_Comprehensive Income (129,656) 41,761 (87,895) Total changes (129,656) 41,761 (87,895) Balance at 31 December 2016 877,988 568,793 1,446,781 Revaluation Accumulated Amounts in United States Dollars (US$'000) Reserves Funds Balance at 1 January 2015 87,953 38,216 126,169 Surplus (Deficit) for the Year - 6,673 6,673 Qther Comprehensive Income for the Year Revaluation Adjustment-Cost 3,557 3,557 Revaluation Adjustment-Depreciation Write Back 1,346 - 1,346 Revaluation Adjustment-Investment Property 259 - 259 Depreciation Write Back on Investment Property 504 - 504 Amortisation on Depreciation Write Back (196) 196 - Amortisation of Revaluation Reserve - Dam Wall Complex (2,480) 2,480 - Total Comprehensive Income 2,990 9,350 12,340 Total changes 2,990 9,350 12,340 Balance at 1 January 2016 90,943 47,566 138,509 Surplus (Deficit) for the Year - 7,263 7,263 Other Com1rehensive Income Ear the Year Amortisation of Revaluation Reserve - Dam Wall Complex (2,480) 2,480 Total Comprehensive Income (2,480) 9,743 7,263 Total changes (2,480) 9,743 7,263 Balance at 31 December 2016 88,462 57,309 145,771 13 ZAMBEZi RIVER AuTronTY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR Tiu YE.A ENDED 31 DECEMBER 2016 STATEMENT OF CASH FLOWS 31 December 31 December Note 2016 2015 ZMW1000 US$000 zMW000 US$000 Cash Inflow From Operating Activities Operating Result 72,083 7,263 73,937 6,673 Depreciation & Amortisation 37,837 3,651 31,211 3,584 Finance Costs - - 40 5 Impairment Losses - - 6,986 802 (Gain) Loss on Disposal of Assets (390) (38) 123 14 (Increase)/Decrease in Other Receivables (Increase)/Decrease in Accounts Receivable (119,089) (13,088) (47,870) (632) Interest Received (14,079) (1,359) (12,230) (1,404) Decrease/(nerease) in Inventories 219 1 (1,005) (24) (Decrease)/Increase in Accounts Payables 9,127 1,188 10,817 2 Increase/(Decrease) in Employee Benefit 465 296 12265 351 Cash Generated From Operations (13,827) (2,086) 74,272 9,370 Interest Received 14,079 1,359 12,230 1,404 Net Cash Inflow From Operating Activities 252 (727) 86,503 10,775 Investing Activities Payments to Acquire Tangible Fixed Assets 6. (93,267) (9,397) (63,027) (5,688) Payments to Acquire Intangible Assets 6. - - Proceeds From the Disposal of Assets 6. 390 38 55 5 Proceeds From Held to Maturity (337) 44 4,363 193 Investments Net Cash Outflow on Investing Activities (93,214) (9,316) (58,609) (5,490) Financing Activities Revenue Grants Received 3. 25,626 2,582 - Proceeds From Long-Term Loans 12. 10,085 1,044 2,658 240 -Non-Cash Benefits From Grants 3 - - 412 37 Net Cash Outflow on Financing 35,712 3,626 3,070 277 Changes in Cash and Cash Equivalents (57,251) (6,417) 30,964 6,672 Effects of Changes in Exchange Rates on (32,864) (8)128,739 3,201 Cash Held in Foreign Currencies Cash and Cash Equivalents at start of year 245,304 22,139 85,601 13,377 Cash and Cash Equivalents at end of year 155,189 15,636 245,304 22,139 Represented By: Bank Balances 11. 29,717 2,994 35,464 3,200 Short'Penin Deposits 11. 125,472 12,642 209,850 18,940 155,189 15,636 245,304 22,139 14 ZAMBEZi RIVER Aumolu ANNUAL REPORT AND FINANCIAL STATEVfENTS FOrR THE YEAR ENDD 31 DECEwBER 2016 STATEMENT OF FINANCIAL POSITION 31 December 31 December Note 2016 2015 ZMW'000 US$'000 ZMWV'000 US$1000 ASSETS Non-Current Assets Property, Plant and Equipment 6. 1,156,658 116,540 1,227,174 110,756 Investment Property 7. 19,888 2,004 22,637 2,043 1,176,545 118,544 1,249,810 112,799 Current Assets Inventories 8. 1,797 181 2,016 182 Hold to Maturity Investments 9. 7,068 712 7,405 668 Trade and Other Receivables 10. 222,821 22,451 103,732 9,362 Cash and Cash Equivalents 11. 155,189 15,636 245,304 22,139 386,876 38,980 358,457 32,352 Total Assets 1,563,421 157,524 1,608,268 145,151 FUNDS AND LIABILITIES Funds and Reserves Revaluation Reserves 877,988 88,462 1,007,644 90,943 Revenue Reserves 568,793 57,309 527,032 47,566 1,446,781 145,771 1,534,676 138,509 Non- Current Liabilities Capital Grants 2. 40,055 4,036 16,108 1,454 Deferred Revenue Grants 2. 4,963 500 5,540 500 Long-Term Loans 12. 12,74-4 1,284 2,658 240 57,761 5,820 24,307 2,194 Current Liabilities Trade and Other Payables 13. 34,694 3,496 25,566 2,307 Employee Benefits and Provisions 14. 24,184 2,437 23,719 2,141 58,878 5,932 49,285 4,448 Total Funds and Liabilities 1,563,421 157,524 1,608,268 145,151 The financial statements were approved by the Board of Directors on /4 A0 and signed on their behalf by: Chairperson Co-Chairperson: 15 ZAMBEZI RIVER AumoRIY ANNUAL REPORT AND FINANCIAL STAT,'r-IENTS FoR Ti YEAR ENDED 31 DECEMBER 2016 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basis of preparation and accounting policies used in preparing the Inancial statements for the year ended 31st December 2016 are set out below- 1. Statement of Accounts-Form and Currency The Authority was constituted by the Zambezi River Authority Act 1987 of Zambia and Zimbabwe, which contain provisions relating to the form and content of the financial statements for the Authority. Being a bi-national institution, the Authority complies with core principles of IFRS 8- Operating Segments, which states that: "an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environment in which it operates". Beginning January 2009, the Government of Zimbabwe suspended the use of the Zimbabwean Dollar in preference for convertible currencies such as the United States Dollars. Since then, the financial statements of the Authority have been presented in Zambian Kwacha and United States Dollars. Since exchange losses on consolidation no longer arise, past exchange losses carried in the exchange adjustment reserve have been treated as realised and transferred to the revenue reserve. 2. Basis of Preparation The financial statements for the year ended 31ff December 2016 are prepared on a going concern basis and in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board ("IASB) and interpretations issued by the International nnancial Reporting Interpretations Committee ("IFRIC') of the IASB. The financial statements have also been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for assets. 3. Statement of Compliance As explained above, the financial statements have been prepared in accordance with International Financial Reporting Standards applicable for the reporting period to 31st December. 4. Adoption of New and Revised International Financial Reporting Standards ("IFRSs") (a) 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 2016: (i). Accounting For Acquisitions Of Interests In Joint Operations - Amendments to IFRS 11 (ii). Clarifica ion Of Acceptable Methods Of Depreciation And Amortisation - Amendments to L4S 16 and IAS 38 16 ZAMBEZI RIVER AuTHORITY AN'Num REPORT AND FINANCIAL STATEMENTS Foe T Hx YiAR ENDED 31 DECEM13R 2016 (iii). Annual Improvements To IFRSs 2012 - 2014 cycle, and (iv). Disclosure Initiative - Amendments to L4S 1. (v). Disclosure Initiative: Amendments to AS 7. -This amendment requires disclosure of changes in liabilities arising from financing activities The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. The Authority also elected to adopt the following amendments early: (b) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2016 reporting periods and have not been early adopted by the Authority. (c) 1 January 2016 (i) IPRS 14 Regulatory Deferral Accounts (ii)_ Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 1.7) (iii). Clarification of Acceptable Methods of Depreciation and Amortisa tion (Arnondmen ts to 1AS 16 and IAS 38) (iv). Agriculture Bearer Plants (Amendments to LAS 16 and IAS 41) (i). Equity Method in Separate Financial Statements (Amendments to 1AS27) (vi). Annual Improvements to IFRSs 2012-2014 Cycle -various standards (vii). Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFERS 12 and IAS 28) (viii). Disclosure Initiative (Amendments to IAS 1) The Authority has no transactions that would be affected by these new amendments. (d) 1 January 2017 (i). Disclosure Initiative (Amendments to IAS 7) (ii). Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to LAS 12) (e) 1 January 2018 (i). IFRS 15 Revenue from Contracts with Customers (ii). IFRS 9 Financial Instruments 17 ZAmEzI RIVER AUmHiORTY ANLNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (iii). Classifiation and Measurement of Share-based Payment 'transactions (Amendments to IFRS 2) ( 1 January 2019 (i). JERS 16 Lenses - Early application ofllWS 16 is permitted only 1or companies that also apply IFES 15 (ii). To be determined - Sale or Contribution of'Assets between an Investor and its Associate or Joint Venture (Amendments to ERS .10 and IAS 268) (g) The Authority's assessment of the impact of these new standards and interpretations is set out below. (i). IRS 9 FinanciaInstruments IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Authority's disclosures about its financial instruments particularly in the year of the adoption of the new standard. The standard must be applied for financial years commencing on or after 1 January 2018. Based on the transitional provisions in the completed IFRS 9, early adoption in phases was only permitted for annual reporting periods beginning before 1 February 2015. After that date, the new rules must be adopted in their entirety. The Authority does not intend to adopt IFRS 9 before its mandatory date. (i) IFRS 15 Revenue from Contracts with Customers The IASB has issued a new standard for the recognition of revenue. This will replace IAS IS which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. Management is currently assessing the effects of applying the new standard on the Authority's financial statements. Mandatory for financial years commencing on or after 1 January 2018. (iii). IFRS 16 Leases IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a 18 ZAMBEZI RivER AvrmoRaY ANNuAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change. The standard will affect primarily the accounting for the Authority's operating leases. As at the reporting date, the Authority has no non-cancellable operating lease commitments. The standard is Mandatory for financial years commencing on or after 1 January 2019. At this stage, the Authority does not intend to adopt the standard before its effective date. There are no other IFRSsor IFRICinterpretations that are not yet effective that would be expected to have a material impact on the Authority. 5. Foreign Currencies In preparing the financial statements, transactions in foreign currencies are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was deterniined. Exchange differences are recognised in profit or loss in the period in which they arise. 6. Investment Property Investment property comprises a number of commercial and residential properties that are leased to individuals and organisations. Each of the leases contains an initial non-cancellable period of one year. Subsequent renewals are negotiated with the lessee. Property interests held under operating leases are classified as investment properties. No contingent rents are charged. Investment property, held to earn rentals and/or for capital appreciation or both and not occupied by the Authority is carried at fair value. The carrying amount of investment property is the revalued amount of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Revaluations are determined having regard to recent market transactions for similar properties in the same location as the Authority's investment property. Revaluations are recognised in equity and transferred to revenue reserves over the remaining life of the asset. 7. Property, Plant and Equipment (a) Cost and Valuation Land and buildings held for use in the supply of services, or for administrative purposes, are stated in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using Fair values at the end of the reporting period. 19 ZAmBEzi RIVER AuTuoRTY ANNUMl REPORT AND FINANC [AL STATEMENTS FOR TiiE YEAR ENDEi) 31 DEcEMBER 2016 Any revaluation increase arising on the revaluation of such land and buildings is recognised in equity, except to the extent that: it reverses a revaluation decrease for the same asset previously recognised in income, in which case the increase is credited to income to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognised in income to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is recognised in income. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Further, as the asset is put to use, the difference between the depreciation on the revalued amount and the depreciation on the cost is transferred from the revaluation reserve to retained earnings. (b) Subsequent Expenditure The Authority recognises, in the carrying amount of a tangible fixed asset, the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Authority and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred. (c) Capital Work in Progress Expenditure on assets under construction is initially shown as Capital Work in Progress and is transferred to the relevant class of asset when commissioned or completed. (d) Depreciation Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses- Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, with full year depreciation being charged in the year of acquisition at the following rates: - Leasehold Buildings 2.5% - Kariba Dam Complex 2.5% - Motor Vehicles 25% - Machinery and Equipment 10% - 20% - Furniture and Fittings 20% - Capital Work in Progress 0% The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. However, assets with nil book values but still employed in the operations of the Authority have been revalued and reinstated on the statement of financial position based on their current depreciable values determined by insurable values. 20 ZAMBEZI RIVER Aumor ANNUAL REPORT AND FINANCIAL STATENSNTS Foii THE YEAR ENDED 31 Di CxMnBER 2016 (e) De-recognition An item of property, plant and equipment is dc-recognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is do-recognised. W Impairment At each reporting date, the Authority assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Authority makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. 8. Consumable Stores Inventories are valued at the lower of cost and net realisable value. Cost is determined on a first in first out basis and includes production labour cost, transport and handling costs. Net realisable value is the estimated selling price at which inventories can be realised in the normal course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Provision is made for obsolete, slow moving and defective inventories. 9. Financial Instruments (a) Composition The Authority's financial instruments consists of cash and equivalents, accounts and sundry receivables, accounts payables, employee benefits provision, accrued liabilities and provisions due to sundry suppliers and government departments and/or authorities to whom statutory deductions are due. Cash and cash equivalents, accounts receivable, payables, and accrued liabilities are reflected in the statement of financial position at cost, which approximates to fair value due to the short-term nature of these instruments. (b) Financial Assets W. Classification The Authority's principal financial assets are cash and cash equivalents and accounts receivable from revenue arising from rendering of services and sundry receivables from administrative advances, prepayments and deposits: 21 ZAMBEzi RIvER AuTromTY ANNUAL REPORT AND FINANCIAL STATEM ENTS FOR THi. YEAR ENDED 31 DEC LMDER 2016 - Cash and cash equivalents include cash in hand and deposits held at call with banks, including bank overdrafts. Bank overdrafts are shown as net of cash balances within current assets on the statement of financial position. - Accounts receivables and sundry receivables are stated in the balance sheet at original amount less an allowance for any uncollectible amounts. An estimate for impairment is made when collection of the full amount is no longer probable. Bad debts are written off when identified- (ii). Impairment Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. (iii). De-recognition The Authority derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset. (c) .nancial Liabilities (. Classification and Measurement Financial liabilities are classified according to the substance of the contractual arrangements entered into: - Payables and accruals are stated at their nominal value. - Provisions are recognised when the Authority has a present legal or constructive obligation as a result of a past event, and it is probable that the Authority will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. - Employee Benefits: The Authority subscribes to defined contribution schemes for the benefit of its permanent or pensionable staff- Contributions are charged to income at 15% of the basic salary. In addition, the Authority has taken out benefits insurance in respect of gratuity for contract employees at 35% of total earned gross salary. - Other Employee Benefits - The estimated monetary liability for employees' accrued gratuity pay entitlement at the balance sheet date is recognised as an expense accruaL 22 ZAmBEzi RIVER AuTHoRITY ANNUAL REPORT AND FINANCIAl. STATEMENTS FOR Tiu YEAR ENDED 31 DECEMBER 2016 - Contingent Liabilities - Contingent liabilities are initially measured at fair value. At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation recognised in accordance with IAS 18 Revenue. 6d. De-recognition The Authority derecognises financial liabilities when, and only when, the Authority's obligations are discharged, cancelled or they expire. (d) Offsetting of Financial Assets and LiabiUties Financial assets and liabilities are offset and net amounts reported in the statement of financial position 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. () Fair Values of-FYnancial Assets and Liabilities The carrying amounts of financial assets and liabilities are, in the opinion of the Board, not significantly different from their respective fair values due to generally shorts periods to maturity dates. Liabilities in respect of retirement benefit contributions, which are of a long- term nature are reflected at cost as the benefit plan operated by the Authority is a defined contribution scheme, under which the Authority's liability is limited to shortfalls between total contributions paid and amounts payable as at the reporting date. (f Financial Risks The Authority's activities expose it to a variety of financial risks. The most important types of risk are credit risk, and liquidity risk. Policies and exposures on risks and financial instruments are discussed in Note 15 to the financial statements. 10. 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 income 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. Grants that are receivable as compensation 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 income in the period in which they become receivable. 23 ZAMBzi RtVER AvrHory ANNUAL REPORT AND FINANCIAL STATEMENTS FOR TuE YiAR ENDED 31 DECEMuER 2016 11. Taxation No allowance is made for income or deferred taxes as the Authority is exempted from paying taxes on capital, income or profit under Articles 17 and 19 of the Zambezi River Authoritv Acts, 1987 of Zambia and Zimbabwe respectively. 12. Capital Management Capital resources comprise accumulated funds and unamortised portions of revaluations and grant balances. The Authority's objectives for the management of capital are to safeguard its ability to continue as a going concern. The Authority considers its cash and cash equivalents to be the manageable capital front its financial resources- The Authority's policy is to maintain sufficient cash balances to cover operating and administration costs over a reasonable future period. The Authority currently has no externally-imposed capital requirements except to maintain sufficient cash balances. 13. Segmental Reporting The Authority has two sets of segments- geographical i.e. Zambia and Zimbabwe, and operating segments. 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). Hence the two operating segments of the Authority are: (a) 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, ZSECO Limited and Kariba Hydro Power Company (Pvt) Ltd ("I-IPC"). The formula used is intended to provide the Authority with sufficient revenues to carry out its mandate and not to generate profits. (b) Investment Property Segment: This relates to investment property comprising a number of commercial and residential properties that are leased to third parties. 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- 24 ZAMBEzl RivER AuToRiTY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THe YEAR ENDED 31 DECEMBER 2016 14. Revenue (a) Water Sales Revenue Revenue is recognised to the extent that it is probable that economic benefits will flow to the Authority, the significant risks and rewards of the service have passed to the consumer and the amount of revenue can be measured reliably. Revenue represents the value of sales invoices. No value added taxes are charged. (h) Investment Property The Authority leases out its investment property under operating leases. None of the Authority's properties held for rental were disposed of, since the last balance sheot date. Further, all the properties are generally committed to tenants over the next one year. 15. Administrative Costs Operating and administrative costs are accrued as incurred. 16. Critical Judgements in Applying Accounting Policies and Key Sources of Estimation Uncertainty Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies above and/or the notes to the financial statements on Pages 23 to 44. However, the key areas are summarised below- (a) Areas of judgement that have the most significant effect on the amounts recognised in the financial statements are: (i) Review ofasset carrying values and impairment charges and reversals (ii). Determination offair values o/non-current assets (ii) Capitalisation of software costs (iv). Impairment losses on receivables: The Authority reviews its gross receivables to assess impairment. In determining whether an impairment loss should be recorded in the income statement, the Authority makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from debtors before the decrease can be identified with an individual debtor in its portfolio. (b) Key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are: 6). Estimation of asset lives (i), Estimation ofliabilities for post-retirement costs (iii). Contingencies 25 ZAMBEZI RIVER AuTnoHITI ANNUAL RErPRT AND FINANCIAL STATEMENTS FOR Ti YEAR ENDEDO 31 DECEMBER 201G 17. Comparatives Where necessary, corresponding figures have been restated to conform to changes in the presentation of the current period. 26 ZAmEzi RivER AuToRiTY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 1. Segment Information The Authority principally operates in two (2) geographical areas, namely Zimbabwe and Zambia. Sales revenues are derived from both countries whilst rental income received mainly from investment properties located in Zimbabwe. The Authority also derives rental income from the property that houses its Headquarters, however a negligible portion is of its offices are let out with this building being classified as property plant and equipment- Services from which segments derive their revenues. The Authority currently derives its revenues from water sales to ZESCO Limited and Kariba Hydro Power Company (Pvt) Ltd (Pvt) Limited and rental income from lease of owned property. 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. Segment revenues and results: Below are the operating results from the continuing operations of the reportable segments. 31 December 2016 Zambia Zimbabwe Consolidated Investment Investment Investment Amounts are Stated in ZfW'fOOO Water Sales Property Water Sales Property Water Sales Property Sales Revenue 153,699 - 106,902 - 260,601 - Rental Income - 1,477 - 873 - 2,350 Other Income 3,627 - 11,253 - 14,880 - Segment Income 157,326 1,477 118,155 873 275,481 2,350 Segment Costs Board Expenses 5,370 2,431 7,802 Repairs and Maintenance 963 - 9,352 714 10,315 714 Staff Costs 68,937 - 34,346 103,282 - Other Administration Expenses 60,181 - 23,453 83,635 - 135,451 - 69,582 714 205,033 714 Net Surplus 21,874 1,477 48,573 159 70,447 1,636 27 ZAMBEZI RivEn AuTHORITY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 31 December 2016 Zambia Zimbabwe Consolidated Investment Investment Investment Amounts are Stated in US$'000 Water Sales Property Water Sales Property Water Sales Property Sales Revenue 14,831 - 10,316 - 25,147 Rental Income 142 84 227 Profit on Disposal of Property Other Income 549 - 887 - 1,436 - Segment Income 15,380 142 11,203 84 26,583 227 Segment Costs Board Expenses 518 - 273 791 Repairs and Maintenance 93 140 37 233 37 Staff Costs 6,617 3,642 - 10,259 Other Administration Expenses 3,636 4,591 - 8,227 10,864 - 8,646 37 19,510 37 Net Surplus 4,516 142 2,557 47 7,073 190 28 ZAMfBEZI RvER AuTHORITY ANN UAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 31 December 2015 Zambia Zimbabwe Consolidated Investment Investment Investment Water Sales Property Water Sales Property Water Sales Property Sales Revenue 128,47g - 96,379 - 224,858 Rental Income - 566 777 - 1,343 Other Income 12,624 9,963 22,587 Segment Income 141,104 566 106,341 777 247,445 1.343 Seement Costs Board Expenses 3,652 2,431 6,083 Repairs and Maintenance 357 9,352 714 9.709 714 Staff Costs 57,433 34,346 91,779 Other Administration 47,310 19,256 66,566 Expenses 108,752 - 65,385 714 174,137 714 Net Surplus 32,352 566 40,956 63 73,308 629 31 December 201.5 Zambia Zimbabwe Consolidated Water Investment Investment Investment Sales Property Water Sales Property Water Sales Property Sales Revenue 14,754 11,068 - 25,822 Rental Income 65 89 154 Other Income 364 1,144 - 1,508 Segment Income 15,118 65 12,212 89 27,330 154 Segment Costs Board Expenses 419 279 - 699 Repairs and Maintenance 41 191 82 232 82 Staff Costs 6,559 3,923 - 10,482 Administration Expenses 4,893 4,423 - 9,316 - 11,912 8,817 82 20,729 82 Net Surplus 3,206 65 3,395 7 6,601 72 29 ZAMEZi RIVER AuTHoRuTy ANNUAL REU FANT) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 31 December 31 December 2016 2015 ZMW000 US$1000 ZMW000 US$1000 2. Grant Income (a) Summary of Revenue Grants Revenue Grants from World Bank Revenue Grants from SIDA Amortisation of Capital Grants (Note 1 (c)(ii)) - Revenue Grants received are for the sole purpose of conducting the activities of the Authority. (b) Revenue Grants Revenue grants from donors are recognised to match approved expenditure in accordance with annual work plans, budgets and provisions as stipulated by the respective grant agreements. (c) Movements in Deferred Revenue 31 December 31 December 2016 2015 ZMW000 US$1000 ZMW'000 US$1000 (i) Movements in Deferred Revenue Balance at Start of Year 5,540 500 Received during_the year - International Development Association (CIWA) (Batoka gorge Hydro-oloctric Scheme) 18,038 1,817 21,236 1,917 - Swedish International Fund (KDRP) 1,625 164 - - The Africa Development Fund (KDRP) 5,963 601 Transferred to Capital Grants (25,626) (2,582) (15,696) (1,417) Effects of Foreign Currency Exchange (578) Balance at End of Year 4,963 500 5,540 500 (ii) Movements in Capital Grants Balance at Start ofYear 16,108 1,454 - Received duringthe year Transferred from Revenue Grants 25,626 2,582 15,696 1,417 Benefit of Below Market Rate Government Loans - 412 37 Effects of Foreign Currency Exchange (1,679) - - Balance at End of Year 40,055 4,036 16,108 1,454 Riii) Total Amortisation Deferred Revenue SCapital Grant Amortisation 30 ZAMBEZI RiVER AumoRfY ANNUAL REPc)RT AND FINANCIAL STATEMENTS FOi THE YEAR ENDED 31 DEC1MBER 2016 NOTES TO THE FINANCIAL STATEMENTS Anounts are stated in Z19"000 and USS5'000 (d) Donors The providers of grants to the Authority during the year are as follows: (i) Cooperation in International Waters in Africa Trust Fund The International Development Association acting as administrator of the Co-operation in International Waters in Africa Trust Fund provided a grant of US$6,000,000 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. (ii) Swedish International Development Agency Trust Fund The International Development Association acting as administrator of the Swedish International Development Agency Trust Fund provided a grant of maximum US$25,000,000 to finance the rehabilitation of the Kariba Dam. The grant is accessed through direct payment requests as well as requests for reimbursements. 31 December 31 December 2016 2015 ZMW'000 USS'o00 ZMW o000 US$1000 3. Revenue Revenue comprises Income derived from water sales which is categorised as follows: Variable Charges 192,727 18,598 180,985 20,784 Fixed Charges 67,873 6,550 43,873 5,038 260,601 25,147 224,858 25,822 4. Other Income Interest Received From: - Overdue Customer Accounts 3,741 361 2,425 279 Term Deposits 8,915 860 8,979 1,031 - Staff House Loans 1,019 98 605 69 -Staff Car Loans 222 21 182 21 - Madison Asset Management 181 18 39 4 Plant Hire Income 20 2 51 6 Profit on Disposal of Non-Current 390 38 0 0 Assets Rental Income 2,350 227 1,343 154 Sale of Data 3 0 0 0 Sundry Income 61 6 578 66 Toll Fees 328 32 272 31 Exchange Gain - 9,455 0 17,230 1,663 23,930 1,662 5. Finance Costs Interest Paid - 40 5 - 40 5 31 AMBEZI RX"R AUTORoTY I I I ANNuAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DFCEMIBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 6. Property, Plant and Equipment 2016 Capital Work Amounts in Zambian Kwacha (ZMW'000) Kariba Dam Leasehold Land Motor Vehicles, in Furniture & & Complex & Buildings Equipment Progress Total Cost At 1 January 2016 1,120,763 97,826 96,191 133,046 1,447,826 Additions - 141 4,874 88,251 93,267 Disposals - (931) - (931) Effects of Foreign Currency Exchange Differences (116,830) (10,198) (10,027) (13,869) (150,924) At 31 December 2016 1,003,933 87,769 90,108 207,428 1,389,238 Depreciation At 1 January 2016 161,894 5,352 53,407 - 220,653 Charge for year 25,098 2,097 8,665 35,860 Eliminated on Disposals (1,039) (1,039) Effects of Foreign Currency Exchange Differences (16,876) (558) (5,459) - (22,893) At 31 December 2016 170,116 6,891 55,574 232,581 Carrying Amounts At 31 December 2016 958,870 92,474 42,785 133,016 1,227,174 At 31 December 2016 833,817 80,879 34,534 207,428 1,156,658 32 ZAMZ RIVE HOR11 ANNI'AL REPORT AND FINANCIAL STATEMENTS FOR THE YEAI ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZAiW'000 and US$'000 Capital Work Amounts in United States Dollars (US$'ooo) Kariba Dam Leasehold Land Motor Vehicles, in Furniture & & Complex & Buildings Equipment Progress Total Cost At 1 January 2016 101,152 8,829 8,682 12.008 130,670 Additions 14 491 8,892 9,397 Disposals - (94) (94) At 31 December 2016 101,152 8,843 9,079 20,900 139,974 Depreciation At 1 January 2016 14,611 483 4,820 19.914 Charge for year 2,529 211 873 - 3,613 Eliminated on Disposals - - (94) (94) At 31 December 2016 17,140 694 5,599 23,434 Carryinig Amounts At 31 December 2015 86,541 8,346 3,861 12,008 110,756 At 31 December 2016 84,012 8,149 3,479 20,900 116,540 33 ZAMBEZi RIR7 ATHORITY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THr YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 6. Property, Plant and Equipment (cont'd) 2015 Amounts in Zambian Kwacha (ZMW'000) Kariba Dam Leasehold Land Motor Vehicles, Capital Furniture & Work in & Complex & Buildings Equipment Progress Total Cost At 1 January 2015 647,271 31,773 41,941 69,561 790,546 Additions - 3,399 24,729 34,898 63,027 Revaluations - 39,411 - 39,411 Disposals - (1,160) (1,160) Transfers - -- (22,298) (22,298) Effects of Foreign Currency Exchange Differences 473,492 23,242 30,681 50,885 578,301 At 31December 2015 1,120,763 97,826 96,191 133,046 1,447,826 De-reciation At 1 January 2015 77,316 8,710 26,247 - 112,274 Charge for year 22,021 5,189 9,331 - 36,541 Depreciation Write-Back on Revaluation - (14,919) - (14,919) Eliminated on Disposals - (1,372) - (1,372) Effects of Foreign Currency Exchange Differences 62,556 6,372 19,200 - 88,129 At 31 December 2015 161,894 5.352 53,407 - 220,653 Carrying Amounts At 31 December 2015 569,955 23,063 15,694 69,561 678,272 At 31 December 2015 958,870 92,474 42,785 133,046 1,227,174 34 ANNUAL REPORT AND FINANCIAL STATEMENTS FuR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 Note 6 (cont'd) Amounts in United States Dollars (US$'000) Kariba Dam Leasehold Land 1otor Vehicles, Capital Furniture & Work in & Complex & Buildings Equipment Progress Total Cost At 1 January 2015 101,152 4,965 6,554 10,871 123,542 Additions 307 2,232 3,150 5,688 Revaluations 3,557 - 3,557 Transfers - (2,012) (2,012) Disposals (105) (105) At 31 December 2015 101,152 8,829 8,682 12,008 130,670 Depreciation At 1 January 2015 12,083 1,361 4,102 - 17,546 Charge for year 2,528 468 842 - 3,839 Depreciation Write-Back on Revaluation - (1,346) - - (1,346) Eliminated on Disposals - - (124) - (124) At 31 December 2015 14,611 483 4,820 - 19,914 Carrying Amounts At 31 December 2014 89,069 3,604 2,453 10,871 105,997 At 31 December 2015 86,541 8,346 3,861 12,008 110,756 35 ZAMBEZI RIVER AuTHORiTY ANNAL REPORT AND FINANCIAL STATEMENTS Fol THEL YEAR ENDED 31 DEcEum3ER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'00 and US$'000 31 December 31 December 2016 2015 ZMW'000 US$1000 ZMW'000 US$1000 7. Investment Property At Depreciated Cost 19,888 2,004 22,637 2,043 Cost At Start of Period 25,235 2,278 12,916 2,018 Effects of Foreign Currency Exchange (2,631) - 9,449 - Differences Gain or Loss on Revaluation of - - 2,871 259 Property At End of Period 22,605 2,278 25,235 2,278 Amortisation At Start of Period 2,599 235 3,145 492 Charge for the Period 389 39 468 42 Depreciation Write-Back on - (5,586) (504) Revaluation Impairment Losses Recognised in 2,270 205 Profit and Loss Effects of Foreign Currency Exchange (271) - 2,301 - Differences At End of Period 2,717 274 2,599 235 CarryinY Amounts 19,888 2,004 22,637 2,043 8. Inventories Consumable Stores 1,797 181 2,016 182 Inventory comprises stock of consumables and other items held for use in the business. There were no significant differences between net realisable values and cost of inventories. 9. Held to Maturity Investments Investments at Amortised Cost Madison Asset Management Company 7,068 712 7,405 668 Limited The investment in Madison Asset Manager Company Limited is a short-term Investment for gratuity for employees. Gains are based on the individual units acquired which are linked to an interest rate of 19% (2015: 11%) per annum and is transferred to the Authority's account at the end of the tenure period. The investment is for the tenure of the contracts of management. 36 ZAMBEZi RIVER AunrowwTY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THi YEAR ENDED 31 DECEM.lBER 2016 NOTES TO TIE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 31 December 31 December 2016 2015 ZMW1000 US$1000 ZMW000 US$000 10. Trade and Other Receivables (10. 1) Water Sales Accounts Receivable ZESCO Limited 141,971 14,304 42,194 3,808 Kariba Hydro Power Company (Pvt) 54,527 5,494 37,185 3,356 Limited 196,497 19,798 79,380 7,164 (a) Analysis of Receivables Gross Amounts Receivable 196,497 19,798 79,380 7,164 Less; Impairment Provision 2,152 217 1,071 97 194,345 19,581 78,309 7,068 (b) Movement in Impairment Provision At the beginning of the Period 1,071 97 618 97 Charge for the Period 1,081 120 452 - Written off during the Period - - - - At the End of the Period 2,152 217 1,071 97 (c) Net Accounts Receivables are Summarised as follows: Impaired 194,345 19,581 78,309 7,068 Gross 196,497 19,798 79,380 7,164 Less: allowance for impairment (2,152) (217) (1,071) (97) Net 194,345 19,581 78,309 7,068 Composition of Accounts Receivables Accounts receivables consist of outstanding invoices and interest on overdue accounts from ZESCO Limited (domiciled in Zambia) and Kariba Hydro Power Company (Pvt) Limited (domiciled in Zimbabwe) attributable to water sales made to the respective power utility companies. Water sales The Authority uses a formula for the sales of water to ZESCO Limited ('ZESCO") and Kariba Hydro Power Company (Pvt) Limited ("KIIPC") which was adopted in 1998. The formula was derived at to ensure that the costs associated with the operations of the Authority were covered by the fees charged to ZESCO Limited and KHPC (Pvt) Limited. On a year by year basis the individual variables and fixed charges are reviewed and agreed by the Authority and the utility companies. The fees are split between a fixed fee and variable fees which are dependent on the cubic meters of water dispensed through the generators. 37 ZAMBEZi RIVER AUTHORITY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW000 and US$'000 31 December 31 December 2016 2015 ZMW'000 US$'000 ZMW'000 US$'000 Overutilisation The Authority agrees on the allocation of water with the power utility companies yearly. The agreed annual base allocation of water for the year was as follows: - ZESCO Limited was allocated 10milliard of water (2015: 20.25milliards) - Kariba Hydro Power Company (Pvt) Limited was allocated 10milliard of water (2015: 20.25milliards) When there is over utilisation of water above annual base allocation, the following penalties will apply: - Over utilisation by up to 5% of annual allocation, no penalty shall be chargeable; - Over utilisation of up to 20% of annual allocation, extra volume shall be charged at a (water tariff in US$/m) x 15 - Over utilization by over 20% of annual allocation, extra volume shall be charged at a (water tariff in US$/n) x 2 (10.2) Rental Debtors Rental Debtors 2,633 265 575 52 (a) Analysis of Receivables Gross Amounts Receivable 2,633 265 2,046 185 Less: Impairment Provision - 1,471 133 2,633 265 575 52 (h) Movement in Impairment Provision At the beginning of the Period 1,471 133 - - Charge for the Period (1,471) (133) 1,471 133 Written off during the Period - - At the End of the Period - - 1,471 133 (c) Net Rental Debtors are Summarised as follows: Neither past due nor impaired - - 1,471 133 Impaired 2,63 265 575 52 Gross 2,633 265 2,046 185 Less: allowance for impairment - (1,471) (133) Net 2,633 265 575 52 38 ZAMBEZI RIVER AuTHowrT ANN I W, REPoRT ANT) FINANCIAL S'IWA'I'EMENTS FoR T1E YAR-A ENDED 31 DECxEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 31 December 31 December 2016 2015 ZMW'000 US$1000 ZMW'000 US$1000 (10.8) Sundry Receivables Staff Debtors 23,481 2,374 21,817 1,969 CBZ Homeownership Scheme 30 3 34 3 Prepayments and Deposits 212 21 480 43 Sundry Debtors - - 1,441 130 ZVDF Zimbabwe 2,121 214 1,075 97 25,843 2,612 24,848 2,243 Total Trade and Other Receivables 222,821 22,459 103,732 9,362 11. Cash and Cash Equivalents (a) Cash at Bank and in Hand Held with Standard Chartered - Current Account 4 0 59 5 -Forex Account 677 68 7,511 678 - Forex Account (World Bank) 4,965 500 5,538 500 Held with Barclays Bank 13,847 1,395 19,771 1,784 Held with Stanbic Bank -Deposit Account 333 34 216 20 - Forex 69 7 Held with BancABC 1 0 1 0 Held with First Merchant Bank 363 37 94 8 Held with Commercial Bank of 9,201 927 2,024 183 Zimbabwe Cash on Hand 80 8 89 8 ZNCB Toll Fees 178 18 150 13 29,717 2,994 35,454 3,200 (b) Short-Term Bank Deposits Commercial Bank of Zimbabwe 46,863 4,722 62,507 5,641 Held with BancABC (Zimbabwe) 57,120 5,755 69,514 6,274 Held with BancABC (Zambia) 10,903 1,099 22,252 2,008 Held with Stanchart (Zambia) - - 620 56 Held with Cavinont (Zambia) 10,586 1,067 16,978 1,532 Held with Zanaco (Zambia) - - 37,980 3,428 125,472 12,642 209,850 18,940 Net Cash and Cash Equivalents 155,189 15,636 245,304 22,139 In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. 39 ZAmEl RIER AuTmoRiTY ANNITAL REPORT AND FINANC1AL STATEMENTS FOR THE YEAR ENDED 31 DECENIBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 31 December 31 December 2016 2015 ZMW'000 US$000 ZMW'000 US$-000 12. Long-Term Loans Government of the Republic of Zambia At Amortised Cost 12,744 1,284 2,658 240 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 and interest. African Deve lop ment Bank Group The Authority has a credit facility amounting to UA25,200,000 for the rehabilitation of the Kariba Dam. The interest rates applicable are at 4% per annum, with each interest period of 6months on withdrawn amounts. The repayment period is 25 years, including a grace period of 2 years on repayment of the principal and interest- No direct payments requests or drawdowns have boon made on this facility as at 31 December 2016. - 13. Trade and Other Payables Staff Bank Loans 278 28 25 2 Trade Creditors 796 80 9,522 859 Provisions and Accruals 27,919 2,813 14,627 1,320 ZVDF Zambia 2,027 204 436 39 Sundry Creditors 878 89 198 18 NAPSA and NSSA 134 14 135 12 ZRA Pension Scheme Trust 706 71 609 55 Zambia Revenue Authority (PAYE) - PAYE 1,932 195 - - -VAT 2 0 - - Zimbabwe Revenue Authority 22 2 15 1 34,694 3,496 25,566 2,307 40 ZAMBEZI RIVER AuTorRITY ANNrm REPORT AND FINANCIAL STATEMENTS FoR THE, YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Anmunts are stated in ZJW'00 and USS'000 31 December 31 December 2016 2015 ZMW'000 US$1000 ZMW1000 US$1000 14. Employee Benefits and Provisions (i) Balances in Employee Benefits Provision Leave Pay Provision 16,997 1,713 15,321 1,383 Gratuity Provision 7,187 724 8,398 758 24,184 2,437 23,719 2,141 (ii) Analysis of Movements in Provisions Leave Gratuity Total Pay AIW'000 ZMW1000 ZMW000 At December 2016 Opening Balance 15,321 8,398 23,719 Charge for Period 5,182 391 5,573 Payments (18,668) (11,405) (30,073) Effects of Foreign Exchange 15,162 9,803 24,965 Differences 16,997 7,187 24,184 At December2015 Opening Balance 7,663 3,791 11,454 Charge for Period 3,799 4,719 8,518 Payments (2,755) (4,188) (6,892) Effects of Foreign Exchange 6,614 4,025 10,639 Differences 15,321 8,398 23,719 Leave Gratuity Total Pay TS$,000 USS'000 US$'000 At Decomber 2016 Opening Balance 1,383 758 2,141 Charge for Period 498 391 889 Payments (168) (425) (593) 1,713 724 2,437 At December 2015 Opening Balance 1,198 592 1,790 Charge for Period 434 539 973 Payments (249) (373) (622) 1,383 758 2,141 41 ZAMBEZi RIvER AuTHoRrrY ANNUAL REP)RT AM) FINANCIAL SIATEMENTS FOR THE YEAR £NDED 31 DEC1,MBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 15. Financial Instruments The Authority faces exposure to the following financial risks: (a). Total Fnancial Instruments 31 December 2016 Assets at Fair Assets at Loans and Value through P Amortised Receivables & L Cost Total ZMW1000 ZMW'000 ZMW'000 ZMW'000 Assets as per statement of financial position Loans and Receivables: -Receivables 222,821 - 222,821 -Financial Placements 7,068 7,068 -CashandfEquivalents 155,189 - 155,189 Total 378,010 7,068 385,078 Other Financial Liabilities at Fair Liabilities at Value through P Amortised & L Cost Total ZMW'000 ZMW'000 ZMW000 Liabilities as per statement of financial position Borrowings Other Financial Liabilities 12,744 24,184 36,928 Trade and Other Payables - 34,694 34,694 Total 12,744 58,878 71.622 31 December 2016 Assets at Fair Assets at Loans and Value through ? Amortised Receivables & L Cost Total US$'000 US$S000 Us$'000 US$'000 Assets as per statement of financial position Loans and Receivables: -Receivables 22,451 - - 22,451 Financial Placements - 712 712 -Cash and Equivalents 15,636 - 15,636 Total 38,087 712 38,799 Other Financial Liabilities at Fair Liabilities at Value through P Amortised & L Cost Total US$1000 US$1000 US$'000 US$1000 Liabilities as per statement of financial position Borrowings Other Financial Liabilities - 1,284 2,437 3,721 Trade and Other Payables - 3,496 3,496 Total 1,284 5,932 7,216 42 ZAMBEZ RwVR AUTHORITy ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEM3+it 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$*000 31 December 2015 Assets at Fair Assets at Loans and Value through Amortised Receivables P & L Cost Total ZMW1000 ZMW1000 ZMW'000 ZMWI000 Assets as per statement of financial position Loans and Receivables: -Trade and Other receivables 103,732 - 103,732 -Placements with Financial Institutions - - 7,405 7,405 -Cash and Equivalents 245,304 - - 245,304 Total 349,036 7,405 356,441 Other Financial Liabilities Liabilities at at Fair Value Amortised through P & L Cost Total ZMW1000 ZMW1000 ZMW,000 Liabilities as per statement of financial position Borrowings Other Financial Liabilities 2,658 23,719 26,377 Trade and Other Payables - 25,566 25,566 Total 2,658 49,285 51,943 31 December 2015 Assets at Fair Assets at Loans and Value through Amortised Receivables P & L Cost Total US$1000 US$'000 US$l000 US$000 Assets as per statement of financial position Loans and Receivables: Trade and Other receivables 9,362 - - 9,362 -Placements with Financial Institutions - - 668 668 -Cash and Equivalents 22,139 - 22,139 Total 31,501 668 32,170 Other Financial Liabilities Liabilities at at Fair Value Amortised through P & L Cost Total US$'000 US$'000 US$'000 Liabilities as per statement of financial position Borrowings (excluding lease liabilities) Other Financial Liabilities 240 2,141 2,381 Trade and Other Payables - 2,307 2,307 Total 240 4,688 4,688 43 ZAMBEziPlVER AuroRTY ANNUAL REPOIT AND FINANCIAL STATEMENTS FoR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FI4ANCIAL STATE1VINTS Amounts are stated in ZMW'OOO and US$'000 (h Credit Risk The Authority takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Authority by failing to pay amounts in full when due. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. As shown below, exposure to credit risk is represented by cash balances and amounts due on accounts receivables: 2016 2015 ZMW'000 US$'000 ZMW'000 US$000 Maximumaexgosure t rdit risk: Cash and bank balances 155,189 15,636 245,304 22,139 Investments 7,068 712 7,405 668 Receivables 222,903 22,469 103,732 9,362 385,160 38,807 356,441 32,170 At the reporting date, other significant concentrations of credit risks lay in receivables, which consist of staff and sundry advances and prepayments. The nature of services offered by the Authority means it does not have significant credit risk exposure to a single counterparty. (c Currency zisk The Authority takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates: 2016 2015 ZMW'000 US$1000 ZMW'000 US$1000 Assets Cash and Cash Equivalents 9,878 995 9,535 861 Liabilities Other liabilities 796 80 9,522 859 Net on-balance sheet position 9,082 915 14 1 Net off-balance sheet position - - Overall open position 9,082 915 14 1 (W% Liquidity Risk and Interest Rate Risk The Authority's activities expose it to a variety of financial risk: market risk (including interest and liquidity risk). This is monitored on a daily basis by management and controlled as far as reasonably possible to minimise the risk of mismatches between current liabilities and current assets. The table below summarises the Authority's interest and liquidity risks: 44 ZAmEzI RVER AumoRY ANNUAL REPOIR AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts ar-e stated in ZMW'000 and US$'000 Weighted Average Up to 1-3 4-12 1-5 Total Effective Interest Amounts in ZMW'000 rate 1 Month Months Months Years At 31 December 2016 Non-Interest Bearing 0% 2,891 8,673 23,129 24,184 58,878 At 31December 2015 Non-Interest Bearing 0% 2,131 6,392 17,044 23,719 49,285 Weighted Average Up to 1-3 4-12 1-5 Total Effective Interest Amounts in US$'000 rate 1 Month Months Months Years At 31 December 2016 Non-Interest Bearing 0% 291 874 2,330 2,437 5,932 At 31 December 2015 Non-Interest Bearing 0% 192 577 1,538 2,141 4,448 (e) Fair Value Estimation The different levels of determining fair value, by valuation method, have been defined as follows: - Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. - Level 2' Inputs other than quoted prices included within level I that are observable for the asset or liability, either directly prices (or indirectly derived from prices). - Level 3: Inputs for the asset or liability that is not based on observable market data (that is, unobservable inputs). The Authority had no financial instruments carried at fair value, by valuation method. - 16. Related Parties (a) Identity ofRelated Parties The Authority has a common enterprise relationship with Governments of the Republic of Zambia and Zimbabwe. Other related parties include the Board of the Authority (Pages 4) and management (Page 4) 45 ZAMBEZI RIVER AUTHORITY ANN 1'tL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'OOO and USS'000 (b) Control and Governance of the Authoity The Authority was constituted by the Zanibezi River Authority Act 1987 of Zambia and Zimbabwe. As a result it has a common enterprise relationship with Governments of the Republic of Zambia and Zimbabwe. Oversight of the Authority is vested in the Ministers. 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 key personnel within the Authority who held office during the year and to the date of this report are shown on Page 4 in the Report of the Board. (c) Key Management of the Authority The key management, with the ability, directly or indirectly, to control or exercise significant influence over the Authority in making financial and operating decisions, are listed on Page 4. (d) 25ansactions with Related Parties The list of related party transactions is limited shown below: 31 December 31 December 2016 2015 ZMW'000 US$'000 ZMW'000 US$1000 Board Allowances 824 80 1,043 120 Board Fees 163 16 170 19 Board Meeting Expenses 1,794 173 1,164 134 Chairman's Fund - - 75 9 Council Meetings Allowances 624 60 461 53 - Council Meetings Expenses 1,510 146 1,055 121 Gratuity 4,070 391 4,719 539 Salaries 47,550 4,570 39,228 4,480 17. Capital Management The Authority's objectives when managing capital are to safeguard the Authority's ability to continue as a going concern in order to provide returns to controlling interests and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital- 2016 2015 ZMW1000 US$'000 ZMW1000 US$1000 Cash (155,189) (15,636) (245,304) (22,139) Net Debt (155,189) (15,636) (245,304) (22,139) Equity 1,446,781 145,771 1,534.676 138,509 Net debt to equity ratio -10.73% -10.73% -15.98% -15.98% -16 ZMBEzI RIVER AuTHoRIY ANNI UAL REPoRT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 D]CEiMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amounts are stated in ZMW'000 and US$'000 18. Capital Commitments Capital Commitments of the Authority are shown in Appendix II. 19. Contingent Liabilities No contingent liabilities have been identified as at the reporting date. 20. Events Subsequent to Balance Sheet Date The Authority has evaluated events subsequent to the reporting date. Based on this evaluation, the Authority has determined that there has not arisen since the end of the period any transaction or event of a material and unusual nature likely, in the opinion of the Board, to affect substantially the operations of the Authority, the results of those operations or the state of affairs of the Authority in subsequent financial periods. 47 ZANmEZ RIVER AUTHORITY ANNUAL REPORT AND FINANCIAL STATEMENTS FoR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS Amnis a-e stated in ZfW'000 and US$'000 - 21. Statement of Capital Expenditure Compared with Capital Budget As at 31 December 2016 Spent Budget Balance ZMW'000 ZMW'000 ZMW'000 Kariba Dam Structure 33,491 33,491 CWIP- Kariba Rehabilitation 17,953 342,710 324,757 OWIP- Batoka HES 70,299 67,047 (3,252) Land & Buildings 141 6,402 6,260 Furniture, Fittings, Plant & Equip. 2,271 6,656 4,385 Motor Vehicles 1,629 1,817 188 ICT Infrastructure 974 23,585 22,611 TOTAL 93,267 481,707 388,440 Spent Budget Balance US$'000 US$,000 US$'000 Kariba Dam Structure - 3,374 3,374 CWIP- Kariba Rehabilitation 1,809 34,530 32,721 OWIP- Batoka HES 7,083 6,755 (328) Land & Buildings 14 645 631 Furniture, Fittings, Plant & Equip. 229 671 442 Motor Vehicles 164 183 19 ICT Infrastructure 98 2,376 2,278 TOTAL 9,397 48,535 39,138 The budget was approved by the Council of Ministers on 23rd December 2016. Auditors Certificate In accordance with Article 15(6)6 of the Zambezi River Authority Act 1987, we certify that the comparative statement shown above is correct. Directors Auditors Chairperson EMM Corporate Partners Co-Chairperson Elasto Mambo Partner 48 ZAmBEzf REr AuomTY ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DEcEMBER 2016 APPENDIX I-DETAILED STATEMENT OF EXPENDITURE Amounts are stated in ZfW'000 and US$'000 31 December 31 December 31 December 31 December 2016 2016 2015 2015 ZMW'000 US$'000 ZMW'000 US$1000 Audit Fees 245 24 175 20 Bad Debts Written Off - - 1,328 153 Bank Charges 332 32 231 27 Board Expenses 8,196 791 6,083 699 Communications & Public Relations 1,873 181 1,699 1.95 Company Entertainment II 1 5 1 Consultancy Fees 11,176 1,078 6,199 712 Depreciation Charge 37,837 3,651 31,211 3,584 Employee Pension 6,487 624 5,785 661 Employee Salaries and Allowances 84,124 8,086 69,675 7,956 Exchange Losses/Gain 3,807 100 - 789 General Insurance Expense 1,242 120 1,247 143 Gratuity 4,070 391 4,719 539 Group Life Assurance 1,794 173 1,469 169 Health and Safety Policy 199 19 242 28 HIV/Aids Policy 717 69 493 57 Hydrological Works 183 18 123 14 Impairment Loss - - 6,986 802 JOTC Programs 404 39 139 16 Kilometer Car Allowance 153 15 57 7 Laboratory Expenses 313 30 145 17 Lake Management Activities 556 54 373 43 Leave Pay Provision 5,182 498 3,799 434 Legal Expenses 133 13 439 50 Loss on Disposal of Assets 123 14 M/V Insurance & Licenses 251 24 255 29 Medical Aid 3,109 299 4,013 458 Motor Vehicle Expenses 3,781 365 3,238 372 NSSA & NAPSA 1,166 112 1090 124 Office Expenses 4,245 410 2,187 251 Overseas expenses & allowances 171 17 371 43 Postage, Telephone & Telex 653 63 607 70 Printing, Stationery, Photos 237 23 207 24 Protective Clothing 137 13 121 14 Recruitment Expenses 198 23 Removal/Transportation 285 27 375 43 Rent 448 43 345 40 Repairs - Dam Structure 1,213 117 1,090 125 Repairs - Residential Property 723 70 694 80 Repairs- General 821 79 644 74 Repairs-Offices & Commercial 849 82 821 94 Research & Development Costs - - 58 7 Restructuring Costs 1,008 97 1,932 222 Security 2,005 193 1,774 204 Seminars, Workshops and Meetings 8,025 774 4,577 526 Settling in allowance 36 3 142 16 Social Tour 227 22 99 11 Staff Canteen Subsidy 96 9 - - Staff Welfare 1,359 131 1,808 208 Subscriptions to Profns & Clubs 82 8 57 7 Subsistence & Travel 4,102 396 4,258 489 Survey Expenses 50 5 20 2 Telemetry Works 173 17 18 2 Utilities and Rates 1,466 141 1,067 123 205,747 19,547 174,811 20,806 49 ZAMBEZi RIVER AuTHORITY ANNilAL REPORT ANM FINANCIAL STATEMENTS FOR THE YFAR ENDED 31 DECrMBE1t 2016 APPENDIX 11- ANALYSIS OF FUNDED PROJECTS Amounts are stated in ZMW'000 and US$'000 Kariba Damn Rehabilitation ProL(jet As at 31 December 2016 Year to Date Cumulative Year to Date Cumulative ZMW'000 ZMW'000 US$1000 US$'000 Cash Receipts: GRZ (proceeds from International Development Association Credit (55630)) 10,362 12,744 1,044 1,284 Swedish International Fund Grant (TF19029) 1,625 1,625 164 164 The Africa Development Fund 5,963 5,963 601 601 European Union Funding - - Total Financing 17,951 20,332 1,809 2,049 Less: Use of Funds by Sub-category 1. Institutional Project Support 17,951 20,332 1,809 2,049 2. Plunge Pool Reshaping - 3. Spillway Refurbishment Total Expenditures 17,951 20,332 1,809 2,049 Balances Batoka rge Hydtroelectric Scheme Project As at 31 December 2016 Year to Date Cumulative Year to Date Cumulative ZMW1000 ZMW'000 US$1000 US$'000 Cash Receipts- International Development Association Trust Fund 18,038 37,060 1,817 3,734 Other Total Financing 18,038 37,060 1,817 3,734 Less Use of Funds bv Sub-category Feasibility studies for the Batoka Gorge HES 10,074 19,540 1,015 1,969 ESIA for Batoka Gorge HES 2,580 5,160 260 520 Transaction Advisory Services 5,377 7,387 542 744 Legal and Institutional Support Dam Break Analysis Project Management 7 8 1 1 Total Expenditures 18-039 32,095 1,818 3,234 Receipts less Expenditure - 4,965 - 500 50 ZAMBEZI RivEat AvrHORITY ANNUAl, RmiwT AN) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 APPENDIX II- ANALYSIs OF FUNDED PROJECTS Amouts are stated in ZMW'000 and US$'000 As at 31 December 2016 Year to Date Cumulative Year to Date Cumulative ZMW'000 ZMW'000 USS'000 US$'000 (continued.) Balances Opening cash balance: IDA Trust Fund 4,966 - 500 Other Total Opening Cash 4,966 ^ 500 - Closing Cash balances: IDA Trust Fund 4,965 4,965 500 500 Total Closing Bank balances 4,965 4,965 500 500 51