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Sewage Services Operating Accounts 2001/02

 

OPERATING ACCOUNTS

FOR THE YEAR ENDED 31 MARCH 2002

 

REVIEW OF THE YEAR 2001/02

ACTIVITIES

Volume of sewage treated is 890 million cubic metres,
representing an increase of 2.8% over the previous year.

 

FINANCIAL PERFORMANCE

Revenue increased by 91.9% (including mediation settlement)
Revenue decreased by 8.2% (excluding mediation settlement)
Expenditure increased by 6.9%
Deficit decreased by 94.6% (including mediation settlement)
Deficit increased by 24.9% (excluding mediation settlement)
Subsidy by Government for 2001-02 is $33.6M (including mediation settlement)
Subsidy by Government for 2001-02 is $783.6M (excluding mediation settlement)
 

OPERATING ACCOUNT FOR THE YEAR ENDED 31 MARCH 2002

  Note
2002
$ Million
2001
$ Million
Revenue 2
1437.6*
749.1
Expenditure 3
1,471.2
1,376.5
Deficit

 
(33.6)
(627.4)
Representing:  
Subsidy by Government 4
33.6
627.4

 

FINANCIAL PERFORMANCE MEASURES
Deficit as percentage of expenditure
2.3%
45.6%
Increase/(decrease) in deficit ($M)
(593.8)
14.8

 

*The figures have taken into account the concessions of $44.7M and $9.5M for Sewage Charge and Trade Effluent Surcharge respectively as announced in the 2002 Budget Speech and the inclusion of the mediation settlement of $750M as further disclosed in Note 2.

The annexed notes form part of these accounts.

 

BALANCE SHEET AS AT 31 MARCH 2002

  Note
2002
$ Million
2001
$ Million
Net assets employed  
Fixed assets 1(b), (c), (d) and 5
20,072.9
18,642.5
Current assets

6
584.6
134.6
Current liabilities 7
(1,376.1)
(1,191.7)
Net current liabilities  
(791.5)
(1,057.1)
   
19,281.4
17,585.4
Financed by  
Public capital account 8
19,281.4
17,585.4

The annexed notes form part of these accounts.

 

1. Accounting Policies

(a) Basis of Accounting
The accounts have been prepared on the historical cost basis of accounting modified to include notional receipts and payments. Although the services incur a deficit in the year, the accounts are prepared on a going concern basis on the assumption that the deficit will be met by a corresponding subsidy from the Government.

(b) Fixed Assets
(i) No cost is included for land.
(ii) By a Resolution passed by the Legislative Council on 26 July 1995, the assets comprising the public sewerage systems and sewage disposal facilities under the control of the Director of Drainage Services on 31 March 1995 as set out in the document titled “Inventory of Public Sewerage Systems and Sewage Disposal Facilities as at 31 March 1995” were appropriated to the Sewage Services Trading Fund (SSTF) at a zero valuation. Upon closure of the SSTF, these assets have been reverted to the Government. The net book values of these assets are shown in note 5.
(iii) All sewerage projects are accounted for in the financial year following the year of commissioning and subject to depreciation.
(iv) Fixed assets costing $100,000 or more each are incorporated in the accounts at the cost of acquisition and subject to depreciation.

(c) Projects under Development
(i) For capital projects, the costs include the actual direct expenditure, and staff costs for design, planning and supervision during the construction period.
(ii) Expenditure incurred on all sewerage projects funded under the expenditure vote of Drainage Services Department (DSD) and other works departments is capitalized as projects under development. Following the year of commissioning of the projects or part thereof, the related expenditure incurred will be transferred to fixed assets.

(d) Depreciation
(i) Depreciation is provided on a straight line basis calculated to write off the cost of the assets less residual value over their estimated useful lives.
(ii) The annual rates of depreciation used are :-
Sewage treatment works
Civil works
2%
Electrical and mechanical equipment
6% - 7%

Pumping stations
Civil works
2%
Electrical and mechanical equipment
4%
Rising mains
4%

Infrastructural assets
Tunnel sewers
1%
Sewers
2.5%
Outfalls
2%

Leasehold improvements
33% - 35%

Computer systems, equipment and vehicles
12.5% - 20%
 

2. Revenue

 
2002
$ Million
2001
$ Million
Sewage charge
412.2
456.8
Supplies to Government establishments
22.1
23.0
Trade effluent surcharge
226.6
239.8
Other income
776.7*
29.5
 
1,437.6
749.1

* It includes the mediation settlement of $750M relating to the contractual disputes between the Government and the sewer tunnel contractors concerning the Government’s re-entry of the sites and forfeiture of the sewer tunnel contracts as disclosed in Note 9 “Post Balance Sheet Events” of Sewage Services Operating Accounts 2000-01. A Settlement Agreement was executed between the contractors and the Government in September 2001, which stated that the contractors should pay to Government a total of HK$750 million in full and final settlement of Government’s Claims.
 

3. Expenditure

 
2002
$ Million
2001
$ Million
Staff costs
545.8
521.2
Light and power
149.4
127.8
Sludge disposal
22.6
28.7
Chemical
30.5
29.4
Operation and maintenance expenses
280.9
266.8
Rental and management charges
15.1
14.6
General operating expenses
127.7
140.9
Depreciation
299.2
247.1
 
1,471.2
1,376.5
 

4. Subsidy by Government

The subsidy by the Government is to cover the costs of provision of free allowance to domestic consumers, concessions for Sewage Charge and Trade Effluent Surcharge as announced in the 2002 Budget Speech, and part of the operating cost of the Sewage Services Utility.

 

5. Fixed Assets

 
Sewage Treatment Works
$Million
Pumping Stations
$Million
Tunnel, Sewers and Outfalls
$Million
Leasehold Improvements
$Million
Computer Systems, Equipment and Vehicles
$Million
Projects Under Development
$Million
Total
$Million
Cost
At 1 April 2001
3,011.4
1,500.1
2,542.9
2.4
84.3
12,106.6
19,247.7
Additions
-
-
-
-
23.0
1,706.6
1,729.6
Transfers from projects
under development
413.2
327.0
918.4
-
-
(1,658.6)
0.0
At 31 March 2002

3,424.6
1,827.1
3,461.3
2.4
107.3
12,154.6
20,977.3
Aggregate depreciation
At 1 April 2001
318.3
112.2
139.1
2.4
33.2
-
605.2
Charge for the year
142.3
56.9
84.3
-
15.7
-
299.2
At 31 March 2002

460.6
169.1
223.4
2.4
48.9
-
904.4
Net book value
At 31 March 2002
2,964.0
1,658.0
3,237.9
0.0
58.4
12,154.6
20,072.9
At 1 April 2001
2,693.1
1,387.9
2,403.8
0.0
51.1
12,106.6
18,642.5

As referred to in note 1(b)(ii), the assets which were appropriated to the SSTF at a zero valuation and reverted to the Government upon its closure have a net book value as at 1 April 2001 of $5,722.5M. After taking into account depreciation of $253.5M for 2001-02, the net book value of these assets as at 31 March 2002 was $5,469.0M.  

6. Current Assets

 
2002
$ Million
2001
$ Million
Debtors and prepayments
583.4
133.6
Bank
1.2
1.0
 
584.6
134.6
 

7. Current Liabilities

 
2002
$ Million
2001
$ Million
Creditors
21.6
6.9
Current account with Treasury
1,354.5
1,184.8
 
1,376.1
1,191.7
 

8. Public Capital Account

The Public Capital Account represents Government’s investment in sewage services.

 
2002
$ Million
2001
$ Million
Balance as at 1 April
17,585.4
15,744.5
Deficit for the year
(33.6)
(627.4)
Additional cash investment by the Government
1,729.6
2,468.3
Balance as at 31 March
19,281.4
17,585.4
 

9. Capital Commitments

 
2002
$ Million
2001
$ Million
Captial expenditure contracted for
7,140.0
5,500.0
Capital expenditure authorised but
2,640.0
5,100.0
not yet contracted for


 
9,780.0
10,600.0