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TAQ

A Annual Report 2014

Abu Dhabi National Energy Company PJSC (TAQA)Annual Report 2014

17,300 MWGross power generation capacity

82,723 GWhGross power generation

887 MIGDGross water desalination capacity

260,100 MIGGross water desalination

POWER & WATER

To read more please go to page20

OIL & GAS

To read more please go to page16

522.3 mmboeProven and probable reserves

158.9 mboedTotal average daily production

4.7 billion Nm3Gas storage capacity

Annual Report 2014

Contents2 An Overview of Our Business 4 Chairman’s Statement6 Letter from the COO 8 Board of Directors10 Executive Management12 Key Events13 Key Priorities 14 Market Overview16 Operational Review – Oil & Gas20 Operational Review – Power & Water24 Financial Review26 Health, Safety, Security & Environment 28 Community Relations29 Corporate Governance31 Shareholder & Bondholder Information32 Financial Statements

We are a leading international energy company, headquartered in Abu Dhabi, with operations in 11 countries across four continents.

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POWER & WATERTAQA has a high quality portfolio of modern power and water assets, delivering power safely and reliably to our customers around the world. Following the successful expansion of our plant in Morocco, we generated record levels of power production during the year.

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AN OVERVIEW OF OUR BUSINESS

In 2014, we undertook a strategic refocusing of our priorities, strengthening our culture of operating excellence, enhancing the safety and reliability of our assets. We changed our structure from siloed business streams to a more connected geographic structure. This will enable our business to drive change, find synergies and improve performance.

Activity by geography and business

Oil & Gas 2P reserves mmboe

Average production

mboed

Gas storagecapacity

million Nm3

1 North America 363.2 89.5 752 United Kingdom 128.6 61.4 –3 The Netherlands 14.1 8.0 4,6004 Iraq 16.4 – –

Power & Water Gross power generation

capacity MW

Gross power production

GWh

5 USA 1,037 6,0656 Morocco 2,056 13,4487 Ghana 220 752

110*

8 Saudi Arabia 250 1,6389 India 250 1,879

100*

10 Oman** 1,00011 UAE 12,487 58,941

Gross waterdesalination

capacity MIGD

Gross water desalination

MIG

11 UAE 88730*

260,100

* Under construction** Power plant and aluminium smelter

To read more please go to page 20

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Abu Dhabi National Energy Company PJSC (TAQA)

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To read more please go to page 16

OIL & GAS We own and operate oil and gas assets in five countries; both onshore and offshore, and conventional as well as unconventional. With a commitment to the highest operational standards, during 2014 we produced 158,900 boed on average – a record for our business.

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Annual Report 2014 taqaglobal.com

Saeed Mubarak Al-HajeriChairman of the Board

Staying true to our Vision and Values, we enhanced our focus on safety – still our chief priority – delivered strong operational performance, and carried out a vital refining and restructuring of the business, including the introduction of a new and dynamic management team.

CHAIRMAN’S STATEMENT

2014 was a year of significant improvement for TAQA, during which we strengthened our position as a respected leading operator and global energy partner, and as a proud ambassador for Abu Dhabi and the UAE.

Staying true to our Vision and Values, we enhanced our focus on safety – still our chief priority – delivered strong operational performance, and carried out a vital refining and restructuring of the business, including the introduction of a new and dynamic management team.

These improvements have made TAQA stronger, fitter, more adaptable and more able to overcome challenging market conditions now and in the future. They also enabled us to continue to play a critical role in supporting Abu Dhabi’s long-term growth trend and the subsequent additional demand for power and water: TAQA’s plants satisfy more than 90% of that demand.

A vital element of our success is our close alignment with the Government of Abu Dhabi’s Economic Vision 2030 and its roadmap for the Emirate’s economic development. We have maintained an open dialogue and a mutually beneficial working relationship with the Government, which has been particularly important during this year of change. Our transparent exchange of information has led to a better understanding of TAQA and our new strategy, and increased support for the restructuring of our business.

A key step in that restructure was the appointment of a largely new Board of Directors. This has brought fresh thinking, innovative approaches and renewed purpose to TAQA. This manifested itself in the appointment of a highly experienced executive management team, led by new Chief Operating Officer, Ed LaFehr.

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Building on Mr LaFehr’s transformation of our North American business, we have reshaped the organisation to bring greater management transparency, responsibility and accountability. This has empowered our team to focus on key business priorities, and changed our structure from siloed business streams to a more engaged and connected geographic structure. Our regional business leaders now have a clearer mandate to drive change, find synergies and improve performance. This has had positive implications for our cost structure and we can already see the benefits in the strong operational performance across the business in 2014.

Notwithstanding the progress that we have made, we cannot ignore the volatility of oil and gas pricing during the year. The unexpected and sharp decline in the oil price during the second half of 2014 has had significant implications for the global industry, including TAQA. We have changed with the times to ensure that we are focused and fit for the future. However, the change in assumptions means that we have recorded an accounting impairment on the value of our assets and will be unable to pay a dividend for 2014.

We must live within our means. To do this we are scaling back our cost base and our capex programmes, so that they can be funded out of cash flows. This does not mean that our commitment to health and safety and operational efficiency has diminished. In fact, quite the opposite. Such a commitment lies at the very core of our future success and we are determined to achieve operating excellence in every business that we run. We will continue to reshape the business portfolio over time, disposing of non-core assets that do not fit the future of the business, but only when it makes sense to do so.

I am also very pleased to announce that we have made significant progress in respect of Emiratisation. Over the course of the year the number of Emiratis in leadership roles in Abu Dhabi increased from 18% to 43% of these positions. This is an important step in the continuing evolution of TAQA and is critical to our long-term sustainability and pursuit of excellence in Abu Dhabi.

On behalf of the Board and myself, I would like to express our gratitude and appreciation to His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the United Arab Emirates, Supreme Commander of the UAE Armed Forces and Ruler of Abu Dhabi, and His Highness Sheikh Mohammed Bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, Deputy Supreme Commander of the UAE Armed Forces and Chairman of the Abu Dhabi Executive Council, for their significant contribution to TAQA’s development.

I would also like to express our gratitude and appreciation to His Highness Sheikh Hazza bin Zayed Al Nahyan, National Security Advisor and Vice Chairman of the Abu Dhabi Executive Council, for his valuable and continued support of TAQA, and His Excellency Dr. Ahmed Mubarak Al Mazrouei, Secretary General of the Executive Council, for his contribution to TAQA’s growth.

Saeed Mubarak Al-HajeriChairman of the Board

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TAQA undertook a strategic refocusing of priorities during 2014, which is already beginning to bear fruit and helping us to meet the challenges of 2015 head-on.

Firstly, we strengthened our culture of operating excellence, enhancing the safety and reliability of our assets. This has led to TAQA’s highest ever oil and gas production of 159,000 barrels of oil equivalent per day, and strong technical availability of 91.2% in the power and water business.

Secondly, we began reshaping our portfolio, through the delivery of major projects and conducting a strategic review of all of our assets worldwide. We will continue to seek opportunities to enhance our focus in our core geographies and business lines, further optimising the portfolio over time. It is clear that improved profitability and growth can come from organic opportunities within our core portfolio, not necessarily greenfield investments or new acquisitions. Consequently, we took the decision to withdraw from the acquisition of power assets in India and the Kurdistan regionof Iraq.

Thirdly, we began building a performance culture to enhance organisational capability, based on our five core values of Safety & Sustainability, Trust, Excellence, Teamwork and Creativity. We have a new Board and new management team, all aligned with these values and our refocused priorities. We restructured TAQA from a business stream model to a regional model, and improved transparency and information flow, which is empowering front-line managers and reducing G&A cost. Such consolidation of responsibility and accountability on a geographic basis has also brought focus to our operations and improved engagement with regional management.

These changes have brought fresh thinking and dynamism to TAQA to ensure we are best placed for the future.

Edward LaFehrChief Operating Officer

LETTER FROM THE COO

Our priority continues to beto reduce our cost base, while improving safety and operating efficiency. This will drive profitability and help us create a stronger operational foundation on whichto build when markets recover.

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Strong underlying operational performanceFull year operating cash flow of AED 11.9 billion was very strong, especially considering the decline in oil and gas prices in the second half of the year. The weak price environment has continued into 2015, which has led us to substantially reduce our capital budget and is a compelling driver for us to continue to reduce costs and preserve cash.

In addition to delivering our highest ever oil and gas production, we reduced capital expenditure to AED 6.4 billion, %13 below budget and AED 2.0 billion less than 2013. We also decreased operating cost per barrel by %6 in North America and %16 in the UK.

Our focus remains firmly on operating excellence and enhanced profitability, which is demonstrated by the success of many of our businesses around the world. At our North American oil and gas operations, for example, we have been able to reduce capital expenditure, reduce costs, and grow headline production through horizontal, multi-stage hydraulic fracturing. This led to free cash flow delivery of AED 0.9 billion.

In the North Sea, we delivered strong oil and gas production efficiency and growth through a back-to-basics focus on our core assets, resulting in free cash flow delivery of AED 1.5 billion.

We also suffered a fatality on our UK, Harding platform in February, which was a major shock to the entire TAQA family.The investigation into the tragedy resulted in a redoubling of our drive to continually improve safety performance.

Our power and water assets delivered strong operational performance, maintaining high availability despite a technical challenge at our power plant in Ghana. With this challenge now resolved we expect to build operational momentum in our power and water fleet in 2015.

In terms of organic growth, we have made significant progress, delivering three mega-projects. In Morocco, we completed the construction of 700 MW additional capacity at our Jorf Lasfar plant, synchronising the units to the grid in the second quarter. In the Netherlands, we completed Gas Storage Bergermeer, successfully injecting gas and committing to customers throughout the year. And at the Atrush development in Iraq, we completed the drilling of all five wells required for the first phase production of 30,000 barrels of oil per day.

Other projects due to come on line in 2015 include the expansion of our Takoradi plant in Ghana and the Sorang hydro plant in India.

These are all projects operated by TAQA; they are important demonstrations of our capability and critically important economic developments for the people and governments of these countries.

Market conditionsThe material drop in oil prices during the second half of 2014 had significant implications for the valuation of oil and gas assets, leading to a non-cash, post-tax impairment of AED 3.2 billion. This impairment has resulted in a net loss for the year attributed to the equity holders of the parent of AED 3.0 billion.

The impairment charge is non-cash and has no impact on TAQA’s ability to meet its obligations, including the service of its ongoing debt obligations. However, it does prevent us from being able to pay a dividend for 2014.

Fit for the futureDue to the ongoing weak price environment, our priority continues to be to reduce our cost base, while improving safety and operating efficiency. This will drive profitability and help us create a stronger operational foundation on which to build when markets recover. A key element of this is organisational simplification, which is now an integral part of our business and more relevant to us than ever before. I would like to express my thanks and appreciation to our staff, our Board of Directors, and to the Government of Abu Dhabi for supporting us through this pivotal year.



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BOARD OF DIRECTORS

H.E. Saeed Mubarak Al-HajeriChairman of the BoardH.E. Saeed Mubarak Al-Hajeri was elected Chairman of the Board in 2014. He has more than 20 years of experience in international finance. He was elected by the World Economic Forum in 2007 as one of the top 250 Young Global Leaders for his contribution to the public and financial sectors in the United Arab Emirates. He holds a Bachelor of Business Administration from Lewis & Clark College in the United States. He is a qualified Chartered Financial Analyst (CFA) and attended the Executive Education Program at Harvard Business School.

H.E. Abdulaziz Abdulrahman Al-HemaidiTAQA Board MemberH.E. Abdulaziz Abdulrahman Al-Hemaidi was elected to the Board in 2011. He joined the Abu Dhabi Water and Electricity Authority (ADWEA) in 1997 and has held a number of key positions, including Managing Director at the Abu Dhabi Water and Electricity Company and the Abu Dhabi Distribution Company. He is currently Advisor at the Al Ain Distribution Company. Before joining ADWEA, he held key positions at the Abu Dhabi Health Services Company, Al Ain International Airport and the Privatisation Committee for the Water and Electricity Sector of the Emirate of Abu Dhabi. He is a Civil Engineering graduate from UAE University.

H.E. Salem Sultan Al-Dhaheri TAQA Board MemberH.E. Salem Sultan Al-Dhaheri was elected to the Board in 2011. He is currently Deputy Director at ADIA, having held various positions since joining the authority in 1993. He is also a Member of the Board of Directors and Member of the Audit Committee of several public and private

companies. He is a member of the Illinois CPA Society, the American Institute of Certified Public Accountants, and the Institute of Leadership and Management in the United Kingdom. A Certified Public Accountant since 1994, he graduated with a Bachelor of Science degree in accounting from Metropolitan State College in Denver.

H.E. Mohamed Abdul Rahman Bandooq Mohamed Al QemziTAQA Board MemberH.E. Mohamed Al Qemzi was elected to the Board in 2014. He is Manager of the Research and Business Development Division at the International Petroleum Investment Company (IPIC). Prior to joining IPIC in 2011, he held the position of Manager of Financial Analysis at Abu Dhabi Securities Exchange (ADX) for 10 years. Al Qemzi is a Board Member at Qatar and Abu Dhabi Investment Company (QADIC) and Oasis International Power. He holds a Bachelor’s degree in finance management from California State University.

H.E. Mohamed Butti Al QubaisiTAQA Board MemberH.E. Mohamed Butti Al Qubaisi was elected to the Board in 2014. He is Director of Exploration and Production at the Abu Dhabi National Oil Company (ADNOC) and has worked at the company for more than three decades. He serves as Chairman of ZADCO and NDC, and Member of the Board of ADCO, ADMA-APCO, and the Environment Agency - Abu Dhabi. He holds a Bachelor’s degree in Petroleum Engineering from Louisiana Tech University, USA.

Mr Ahmed Khalifa Al MehairiTAQA Board MemberMr Ahmed Khalifa Al Mehairi was elected to the Board in 2014. He is a senior investment professional at the Direct Investments Department of the Abu Dhabi Investment Council (ADIC). Prior to joining (ADIC) in 2008, he worked in the Far East Department at the Abu Dhabi Investment Authority (ADIA). Mr. Al Mehairi is currently a Member of the Board of Directors at Etihad Airways, Al Dar Properties PJSC, Massar Solutions PJSC and FOODCO Holding PJSC. Previously, he served as a Member of the Board of Directors at Sorouh Real Estate PJSC and Aseel Finance PJSC. Mr Al Mehairi holds a Bachelor of Commerce degree in finance from The John Molson School of Business, Concordia University, Montreal, Canada.

H.E. Khaled Abdulla Al MassTAQA Board MemberH.E. Khaled Abdulla Al Mass was elected to the Board in 2014. He is Chairman of Imass Investment. He is also a Member of the Board of the Tourism Development & Investment Company (TDIC) and an original founding Board Member of the National Health Insurance Company (Daman). He has served as a Board Member in many companies specialising in a variety of different fields, including real estate, finance and investment. He holds a Bachelor of Science in Management from Marylhurst University, Oregon, USA.

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His Excellency Saeed Mubarak Al-HajeriChairman of the Board

Mr Ahmed Khalifa Al MehairiTAQA Board Member

His Excellency Salem Sultan Al-DhaheriTAQA Board Member

His Excellency Mohamed Butti Al QubaisiTAQA Board Member

His Excellency Mohamed Abdul Rahman Al QemziTAQA Board Member

His Excellency Abdulaziz Abdulrahman Al-HemaidiTAQA Board Member

His Excellency Khaled Abdulla Al MassTAQA Board Member

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Ryan WongChief Financial Officer


Ahmed Al SayeghAssistant to the COO/Business Development

Grant GillonExecutive Vice President, Portfolio

Saeed Rashed Al Darei Vice President, Government Affairs

Ahmed Abbood Al AdawiVice President, UAE Business

Saeed Hamad Al DhaheriExecutive Vice President, Business Support

Michael McGuintyGeneral Counsel & Company Secretary

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Edward LaFehr Chief Operating Officer Edward LaFehr joined TAQA in 2012 and was appointed Chief Operating Officer in February 2014. Mr LaFehr was previously President of the Company’s North American business, its largest subsidiary. Prior to joining TAQA, Mr LaFehr was Senior Vice President at Talisman Energy Inc, with responsibility for its Canadian business. Over a 32-year career in the energy industry, Mr LaFehr has also worked in the UK, Egypt and Trinidad & Tobago. He holds a Master of Science in Geophysics from Stanford University and a Master of Science in Mineral Economics from the Colorado School of Mines. He is a United States national.

Ryan Wong Chief Financial Officer Ryan Wong joined TAQA in 2008 as Group Vice-President and Treasurer. He was appointed acting Chief Financial Officer in 2014. As Group Vice-President and Treasurer, Mr Wong has been responsible for overseeing the Company’s corporate finance, cash and risk management, and corporate insurance programme. He has 35 years of experience in the energy industry, including previous senior financial positions as the Corporate Treasurer of PrimeWest Energy and the Manager of Corporate Planning with Anderson Exploration Ltd. and Devon Canada. Mr Wong is a Canadian national. He is a Certified Management Accountant (CMA) and has an MBA degree from the University of Calgary in Canada.

Michael McGuinty General Counsel & Company Secretary Michael T. McGuinty joined TAQA in 2014 as General Counsel & Company Secretary. Mr McGuinty previously worked for Schlumberger for 18 years, where he held a series of senior legal positions in the Middle East, Europe and North America, including Director of Legal Operations; Deputy General Counsel, Corporate and M&A; and, most recently, Director of Compliance. Prior to Schlumberger, Mr McGuinty practiced corporate and commercial law in Canada and France. He has a Bachelor of Law (LLB) and a Bachelor of Civil Law (BCL) from McGill

University in Canada, and a Bachelor of Social Sciences from the University of Ottawa. Mr McGuinty is a Canadian and Spanish national.

Saeed Hamad Al Dhaheri Executive Vice President, Business Support As Executive Vice President Business Support, Mr Al Dhaheri is responsible for the Group’s Human Resources, HSSE, Corporate Communications, IT, Procurement and General Services functions. Mr Al Dhaheri has more than 12 years of experience in the human resources industry in Abu Dhabi. He joined TAQA in 2014 from the government-owned Abu Dhabi Media Company, where he led the human resources, procurement and administration functions. Mr Al Dhaheri has also served on the Board of Directors of United Printing & Publishing and previously held human resources leadership positions at Etihad Rail and Abu Dhabi Health Services Company – SEHA. He holds a Bachelor of Arts in International Business from Eckerd College, Saint Petersburg in the United States and a Master’s in Human Resources Management from Abu Dhabi University in the United Arab Emirates. He is a United Arab Emirates national.

Grant GillonExecutive Vice President, Portfolio Grant Gillon joined TAQA in 2012 and is responsible for TAQA’s oil and gas operations in Iraq, and power assets in India and the United States. He also oversees Group strategy and acquisitions and divestments. Mr Gillon has over 15 years of experience in the energy sector. Prior to joining TAQA, he led the global business development and mergers and acquisitions teams at International Power in London. Mr Gillon qualified as a Chartered Accountant with PricewaterhouseCoopers in London and holds a Bachelor of Engineering (BEng) in Aerospace Engineering from Glasgow University. He is a United Kingdom national.

Ahmed Abbood Al Adawi Vice President, UAE Business Ahmed Al Adawi joined TAQA in 2010 and is Vice President UAE Business, responsible for the company’s UAE-based power

and water businesses and its investment in Sohar Aluminium in Oman. He began his career in the energy sector in 2001. Mr Al Adawi is a Board member of several TAQA subsidiaries, including the Jubail energy company in Saudi Arabia and the Fujairah Asia Power Company PJSC in the UAE. He is a Certified Financial Analyst. He graduated with an MBA from London Business School and a Bachelor of Science degree in Electrical Engineering from University of Evansville in the United States. He is a United Arab Emirates national.

Saeed Rashed Al Darei Vice President, Government Affairs Saeed Al Darei joined TAQA in 2013 and is Vice-President Government Affairs. He is responsible for establishing strategic relationships in the UAE and internationally. Mr Al Darei started his career in 1999 at Al Ain Distribution Company, a subsidiary of Abu Dhabi Water and Electricity Authority (ADWEA). He has held leadership positions at several Abu Dhabi Government departments, including the Abu Dhabi Retirement Pensions and Benefits Fund (ADRPBF); the Department of Social Services and Commercial Buildings (DSSCB); the Department of Municipalities and Agriculture (DMA); the Department of Transport (DoT); and the Department of Civil Service (DCS). Mr Al Darei holds a Bachelor Degree in Management, Sociology and Leadership from Gonzaga University in the United States. He is a United Arab Emirates national.

Ahmed Yousif Al SayeghAssistant to the COO / Business DevelopmentAhmed Al Sayegh joined TAQA in 2012 and is the Business Development Assistant to the Chief Operating Officer. He was previously Deputy Managing Director at TAQA. Mr Al Sayegh has held investment positions at the Abu Dhabi Investment Authority (ADIA) for more than 20 years. He has a Bachelor Degree in Finance from Concordia University, Portland, Oregon in the United States. He is a United Arab Emirates national.

EXECUTIVE MANAGEMENT 11


KEY EVENTS

Edward LaFehr appointed COOEdward LaFehr appointed to the position of Chief Operating Officer. Mr LaFehr was previously President of TAQA’s North America operations.

New invigorated executive teamTAQA appointed a new executive team consisting of Ryan Wong (CFO), Saeed Al Dhaheri (EVP Business Support), Ahmed Al Adawi (VP UAE Business), Saeed Al Darei (VP Government Affairs), Michael McGuinty (General Counsel and Company Secretary), Grant Gillon (EVP Portfolio), and Ahmed Al Sayegh (Assistant to the COO/Business Development).

Corporate bond refinancing TAQA repaid US$1.2 billion of bonds maturing in Sept 2014 by issuing US$750 million senior notes due in May 2024, a Euro 180 million 10 year private placement and arranging a US$200 million equivalent Samurai term loan facility.

TAQA restructured its core businesses around the globe, with a focus on safety and operational excellence. This has driven record production across our businesses.

Morocco power station expansion completedTAQA increased the capacity of its power station in Morocco by 50%, from 1,356 to 2,056 MW. The facility provides more than 50% of Morocco’s electricity demand and is the largest coal-fired power station in the MENA region.

Shareholders elect new Board of DirectorsTAQA shareholders elected a newBoard of Directors at the Annual General Meeting after the expiry of the previous Board’s three-year term. The new Board is chaired by H.E. Saeed Al Hajeri.

Gas Storage Bergermeer starts partial commercial operationsTAQA started preliminary commercial operations at its Bergermeer gas storage facility in the Netherlands. It is the largest gas storage facility in Northwest Europe and will significantly contribute to European energy security.

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KEY PRIORITIES

TAQA undertook a strategic refocusing of priorities during 2014, which is alreadybeginning to bear fruit and is helping us to meet the challenges of 2015 head-on. These include:

Capital expenditure* (AED billion)

2013: 8.4

2014: 6.4

2015: 3.9

* Including acquisitions** Budget

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•Bringing focus to our operations, consolidating responsibility and accountability on a geographic basis, simplifying business processes and engaging our regional management.

•Strengthening our culture of operational excellence, with a relentless emphasis on safety and environmental stewardship, which also benefits our operational performance.

•Building a performance culture to enhance organisational capability, based on our five core values of Safety & Sustainability, Trust, Excellence, Teamwork and Creativity.

•Reducing our capital commitments and cost structure, thereby preserving cash and increasing competitiveness, whilst retaining the safety and operational integrity of our businesses.

•Continuing to reshape the asset portfolio by disposing of non-core assets that do not fit the future strategy of the business.

•Living within our means by reducing borrowing and paying back debt.

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MARKET OVERVIEW

2014 saw a steep decline in benchmark energy prices as the oil market reacted to a significant supply-demand imbalance. How rapidly supply is curtailed due to the significantly lower prices will be a story to watch in the coming year.

Crude oil Following a period of three to four years of relatively high and stable oil prices, the market saw a steep fall starting in July which lasted through to the end of the year. While the supply-demand balance had turned bearish earlier in the year, the decision by OPEC to not reduce their production levels to accommodate growing North American production was seen as the catalyst for the dramatic fall in prices. Many geopolitical events, which usually drive volatility and higher prices, existed during the year – such as the Libyan unrest, conflict in Ukraine, and war in Syria and Iraq – but were not significantly threatening to the world oil supply to move the oil markets.

On the supply side, North America continued to see significant oil production gains driven by shale oil development in the United States and oil sands development in Canada. United States production continued to grow at a rapid rate, increasing another 15% during 2014 from 7.8 million barrels per day (mmbl/d) to over 9 mmbl/d. With large amounts of crude being moved by rail, and several rail car derailments in 2013, there was a concern of an increased regulatory burden in 2014. However, this has not proven to be a factor to slow down production growth.

Production growth outside of North America was almost flat for the year, as no other country has yet been able to replicate the shale oil revolution experienced by the onshore United States and Canada producers.

On the demand side, world oil consumption grew slightly (1%) as weak economic growth in Japan and Europe was offset by continued growth in China and other non-OECD countries.

With the rapid fall in world oil prices, the WTI discount to Brent has contracted in absolute terms but if onshore oil production continues to grow and inventories build, the Cushing Oklahoma pricing point is likely to remain oversupplied relative to Brent for the near term, which will sustain a discount to Brent.

Outlook Global oil demand growth in 2015 is expected to be moderate as global economic growth appears shaky. Chinese oil demand is expected to grow throughout 2015 but slowing economic growth and the prospect of a de-linking of economic growth and oil demand are causes for concern going forward. Further United States oil demand growth is expected in line with the expected economic expansion, and as lower transportation fuel costs encourage increased travel and larger vehicle purchases. Japan and Europe will likely see continued falling demand as both Germany and France experience weak economic growth.

The world oil supply-demand balance in 2015 will largely be determined by how quickly supply growth is curtailed by the lower price environment. It appears unlikely, given their public statements, that OPEC leaders will cut back their production and lose market share to support prices. A more likely scenario is for continued low prices for a sustained period of time until significant long-term oil development projects are cancelled, before oil prices rise significantly.

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Crude oil$/bbl

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0 2010 2011 2012 2013 2014

Henry Hub AECO NBP

Natural gas$/mmbtu

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Shale gas production continues to drive supply increases, with total United States production reaching the record level of 70 billion cubic feet per day (bcf/d) by the end of 2014. The prolific Marcellus shale gas field in particular continued to see large production gains, reaching 16 bcf/d by the end of 2014, or 22% of total United States production.

On the demand side, competition between gas and coal for power generation led to fuel switching and acted as a dampener on gas price increases. An unseasonably cool winter early in the year supported prices, with record storage withdrawals seen to satisfy the extra heating demand. However, sustained production growth throughout the summer and autumn helped replenish storage inventories to healthy levels.

OutlookContinued shale gas development will likely keep the market well supplied for several years, but a small source of optimism may come from the expected decrease in shale oil drilling, which should decrease new ‘associated gas’ from these wells.

The prospect of large future demand from several proposed LNG export terminals on the Pacific and Gulf coasts could act to support the market in three to five years’ time, but large infrastructure and transportation costs will consume significant amounts of the existing regional price arbitrage between North American, Asian and European markets. In addition, lower oil prices have caused world oil-linked gas prices to decrease to levels that may make large new LNG investments less likely to be approved.

Natural gasWorld natural gas prices, unlike oil, are not reflective of global economic demand, and there remain significant differentials between North America, Asia and European prices.

In North America, where the majority of TAQA’s gas production is located, the Henry Hub spot price averaged US$4.35/million British thermal units (mmBtu), 17% higher than 2013, largely due to cold weather early in the year which led to increased seasonal demand and higher prices.

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We have streamlined our global oil and gas businesses, simplifying operating structures and reporting lines. This has allowed us to focus on safety and operational excellence, while achieving record production.

2P reserves(mmboe)

North America 363.2United Kingdom 128.6The Netherlands 14.1Iraq 16.4

OPERATIONAL REVIEW


OIL &GAS

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taqaglobal.comAnnual Report 2014

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OverviewDuring 2014, we redesigned our businesses to increase our focus on safe, reliable and efficient operations. As part of this, we undertook a programme of organisational simplification through which we transformed our structure from a business stream model to a geographic model. This has eliminated a layer of executive management and devolved responsibility directly to regional leaders. The direct reporting lines simplify communication and increase accountability. This has allowed us to maintain our focus on safety and introduce significant operational enhancements, particularly in respect of cost rationalisation.

Our relentless determination to improve operational reliability and efficiency ensured that we maintained production and limited downtime, contributing to record levels of production. Globally, we produced 158.9 thousand barrels of oil equivalent per day (mboed), delivering revenues of AED 13.9 billion, up 14% on 2013. EBITDA for the year was AED 7.7 billion, showcasing our strong operational cash flow.

The strategic and operational actions taken across the business during 2014 have ensured we are better placed to take on challenges, most notably the continuing effects of the significant fall in global oil prices that occurred in the last quarter of the year.

Safety Safety is critical to TAQA’s business strategy. 2014 demonstrated that we need to be uncompromising in our pursuit of safety excellence. In our oil and gas operations, we reduced the lost time incident rate (LTIR) from 0.10 to 0.03* and the recordable injury rate (RIR) from 0.59 to 0.51* compared to 2013.

Despite our reduced injury rates, we tragically lost a colleague in a fatal accident in February 2014 in our UK North Sea business. The investigation into the causes and contributory factors of the tragedy resulted in a reiteration of our drive to further improve our safety performance by reviewing all safety procedures with an active involvement of our HSSE Global team.

OPERATIONAL REVIEWOIL & GAS

During 2014, we redesigned our businesses to increase our focus on safe, reliable and efficient operations.

Production

158.9mboed

*Per 200,000 hours

Reserves (mmboe)

2012: 600

2013: 612.4

2014: 522.3

Production (mboed)

2012: 135.4

2013: 142.3

2014: 158.9

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North America Our North American subsidiary completed a major, sequenced restructuring during 2014, improving business processes and organisational efficiency, enabling a $40 million reduction in General and Administrative costs over the past two years. Furthermore, by driving accountability, improving project planning and execution, combined with disciplined capital allocation, we have doubled capital efficiency over the last 18 months, growing production levels to 89.5 mboed.

This performance has been made possible through focusing our organisation on our core areas, and using enhanced horizontal multi stage hydraulic fracturing in our liquids rich gas plays. The increased reservoir access achieved with optimised fluids and up to 20 hydraulically fractured stages has dramatically improved the production capability and resource recovery from each well.

We have seen exceptional results from the Upper Mannville formation, continuing to develop and expand the geographic extent of the play. In 2014, we saw some of our highest production test results to date from our Upper Mannville wells, several of which flowed above 10 million cubic feet per day (mmcfd). Success was also delivered in the Alberta Plains, Glauconite and Pouce Montney plays, with a large inventory of development locations across our undeveloped acreage.

TAQA is also a leader in safety in Canada and we reduced our RIR in North America from 0.50 in 2013 to 0.38 in 2014.

UK North Sea During the year, the UK business increased accountability and improved operational planning by introducing division managers with single point accountability for each asset. Operational performance consequently was strong, with record production of 61.4 mboed. This reflects greater reliability across all of our fields, as well as the excellent work of our well intervention teams which added over 3 mboed from existing wells.We have seen a step change in reliability during the year, with average platform uptime of 85%, reversing a three-year downward trend, and above our target of 82%. This is approaching top quartile performance and remains a core focus.

We continue to develop wells to tie-in to our existing platforms, including the Cormorant East, Cladhan, Maclure and Brae fields.

NetherlandsAs part of our restructuring process, we are integrating our Netherlands and UK operations to create a consolidated European entity. This will help us leverage our scale and talent base to become stronger as we weather commodity price challenges. During the year, the Netherlands business reduced G&A costs by 15%, while improving safety, decreasing our RIR from 0.81 in 2013 to 0.40.

Starting partial commercial operations at the Gas Storage Bergermeer facility in the Netherlands was a major milestone for TAQA. It will be the largest open access gas storage facility in Europe and will significantly contribute to security of energy supply. During the year we contracted all remaining short-term capacity for the 2015 storage season and successfully launched a programme to monetise spare storage capacity.

In the upstream business, we produced an average of 8 mboed from the Netherlands, aided by first oil from the new offshore fields Amstel and Maas. 2015 will also be bolstered by new wells Rijn A13-Z and P15-19.

Kurdistan Region of IraqWe have drilled five wells at the Atrush project since acquiring the asset and assuming operatorship. Our teams have managed to reduce drilling costs and improve operational performance over the past two years. Well testing has yielded commercial oil rates and supports and encourages further development. The first phase of the development includes a central processing facility and an export pipeline to deliver 30 mboed.

The strategic and operational actions taken across the business during 2014 have ensured we are better placed to take on challenges, most notably the continuing effects of the significant fall in global oil prices that occurred in the last quarter of the year.

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Annual Report 2014

OPERATIONAL REVIEW

Gross Power Generation Capacity(MW)

UAE 12,487Morocco 2,056USA 1,032Oman 1,000

Our power and water business reached a number of significant milestones, supported by robust operations.

POWER &WATER

India 250Saudi Arabia 250Ghana 220

20



21

Technical availability:

91.2%

*per 200,000 hours

OPERATIONAL REVIEWPOWER & WATER

In 2014, we generated record production of 82,723 GWh of electricity, reflecting the completion of our power station expansion in Morocco, combined with strong technical availability of 91.2% across our fleet as a whole.

Robust operational performance In 2014, we generated record production of 82,723 gigawatt hours (GWh) of electricity, reflecting the completion of our power station expansion in Morocco, combined with strong technical availability of 91.2% across our fleet as a whole.

Safety remains our number one priority across our power project portfolio. During the year, we had a recordable injury rate of 0.6* and lost time injury rate of 0.04*, both improving significantly on the previous year. While we are very proud of this performance, continuously improving safety remains our key priority.

The UAE portfolio performed strongly, with technical availability of 91.8%, reflecting the modernity of our plants and their high-quality operations. The Jorf Lasfar power station in Morocco recorded a technical availability of 92.6% for units 1-4, which is considered an especially strong performance for coal-fired plants. Technical availability at TAQA’s Takoradi 2 power station in Ghana was affected by a persistent outage at one of its units during the second half of the year.

The strong operational performance at our power and water operations delivered underlying revenues of AED 9.1 billion, a 1.1% increase compared to AED 9.0 billion in 2013. This resulted in EBITDA of AED 7.0 billion.

Critical power and water infrastructure for Abu DhabiTAQA is the majority owner of eight power and water plants across the UAE, collectively supplying more than 90% of Abu Dhabi’s power and water

requirements. Our plants also supply the Emirates of Fujairah, Umm Al Quwain and Sharjah with clean water. In 2014, total power generation capacity was 12,487 MW and total desalination capacity was 887 million imperial gallons per day (MIGD).

The plants sell all their electricity and water production through purchase agreements with Abu Dhabi Water and Electricity Company, and we are principally paid for the availability of generation and desalination capacity, rather than the amount of electricity and desalinated water produced.

The long-standing growth in demand for electricity in Abu Dhabi continued in 2014, with our domestic assets generating a total of 58,941 GWh and desalinating a total of 260,100 million imperial gallons (MIG) of water. Technical availability was 91.8%, commercial availability for power generation was 96.5%, and water desalination was 99.3%, which is in line with top international standards. This strong operational performance was delivered despite outages at the Fujairah 1, Fujairah 2 and Umm Al Nar power plants. The expansion of our reverse osmosis water desalination facilities at Fujairah 1, which began in 2013, is progressing well and is now more than 85% complete. The expansion will increase the plant’s water desalination capacity from 100 MIGD to 130 MIGD. 70 MIGD of that capacity will be produced using reverse osmosis, making the plant one of the largest reverse osmosis desalination facility in the Middle East. The expansion also delivers improved pre-treatment to cope with severe algae bloom or red tides.

Gross power generation (GWh)

2012: 75,124

2013: 77,458

2014: 82,723

Gross water desalination (MIG)

2012: 240,801

2013: 253,420

2014: 260,100

22


A year of major project delivery and high availability, resulting in strong underlying revenues of AED 9.1 billion and EBITDA of AED 7.0 billion.

A growing world class international fleet of power assetsThe key development for our international power operations in 2014 was the successful delivery of units 5 and 6 at our Jorf Lafar power station in Morocco, expanding the facility by an additional 700 MW. TAQA now generates over 50% of Morocco’s total electricity requirements and Jorf Lasfar is the largest coal-fired power plant in the MENA region.

In 2014 we had an excellent operational performance, with our Moroccan operations generating 13,448 GWh of electricity, combined with high technical availability levels of 92.6% at units 1-4 and 89.9% at units 5 and 6 after full and successful units integration to the Morocco national grid.

Additionally, we achieved a number of quality certifications during 2014; ISO 9001 for our quality management systems, ISO 18001 for health and safety and ISO 140001 for environmental performance.

In Ghana, technical availability of our Takoradi 2 plant was 44.8% due to a prolonged outage at one of its units during the year.

The expansion of Takoradi is ongoing, with commissioning expected in 2015. This will convert the facility from a simple-cycle to a combined-cycle generation facility, increasing the net generating capacity from 220 MW to approximately 330 MW with no increase in fuel consumption.

In the United States, TAQA has an 85% interest in a tolling agreement through its interest in TAQA Gen-X for the 832 MW Red Oak power plant in New Jersey. The plant generated 5,319 GWh of electricity in 2014, a 30% increase compared to the previous year.

In 2014, TAQA Gen-X completed a gas pipeline, sourcing cheaper fuel from neighbouring gas supply facilities. The project was completed within budget and is expected to result in material improvement to the plant’s financial performance.

TAQA also owns 50% of the 205.5 MW Lakefield wind farm in Minnesota. In 2014, Lakefield produced 746 GWh.

In India, our 250 MW Neyveli power plant, located in the state of Tamil Nadu, recorded technical availability of 90.6% in 2014. The plant produced a total of 1,879 GWh of electricity during the year, a 4% increase on last year. The entire capacity is sold to TANGEDCO, the local state government-owned utility, under a 30-year power purchase agreement.

TAQA also has a significant interest in the 100 MW Sorang hydroelectric project in Northern India. Construction has progressed significantly and commercial operations are expected to be achieved during 2015. TAQA has continued to build good relationships with the local community and the plant will provide an attractive employment opportunity for local residents. The plant will supply electricity into the national electricity grid and will look to benefit from the continuing strong demand for power in India.

In Oman, TAQA holds a 40% stake in the Sohar Aluminum smelter and its 1,000 MW power generation facility, the output of which is mostly utilised by the smelter. During 2014, Sohar has continued to make a positive contribution, benefiting from the stronger aluminium pricing environment.

In Saudi Arabia, TAQA holds a 25% interest in the Jubail power plant, a 250 MW co-generation facility, which delivers power and steam to the SADAF Petrochemical Plant. During 2014, the plant generated 1,638 GWh.

Finally, the decision was taken to withdraw from the planned acquisition of an interest in a power plant in the Kurdistan region of Iraq, as well as two hydroelectric plants in India.

23


FINANCIAL REVIEW

In 2014, TAQA achieved record levels of production from both our oil and gas and power businesses.

Within Oil & Gas, TAQA produced an average of 158,900 boed in 2014. This resulted in a 14% increase in revenues to AED 13.9 billion and improved EBITDA of AED 7.7 billion.

Our Power & Water business also reported record production of 82,723 GWh, reflecting the completion of our power station expansion in Morocco, and strong technical availability of 91.2% across the fleet. This contributed to a 1.2% increase in revenues to AED 9.0 billion and EBITDA of AED 7.0 billion.

The strong overall performance helped to generate underlying revenues of over AED 23 billion during the year, combined with record EBITDA of AED 14.5 billion.

However oil and gas prices declined significantly in the second half of 2014 and are expected to take some time to recover and as a result, TAQA has recorded a post-tax impairment of AED 3.2 billion against our oil and gas assets. This impairment has resulted in a net loss for the year attributed to the equity holders of the parent of AED 3.0 billion. This is a non-cash impairment and therefore does not impact on our ability to meet our financial commitments. However, it does prevent us from paying a dividend for 2014.

In 2014, TAQA achieved record levels ofproduction from both our oil and gas and power businesses.

Revenues and costsTotal revenues for 2014 were AED 27.3 billion, 6.1% higher than the AED 25.8 billion reported in 2013.

When looked at on an underlying basis (eliminating the effect of construction and backup fuel revenues which, as a pass through item, have offsetting expenses in the cost of sales) revenues grew by 8.6% to AED 23.0 billion in 2014 from AED 21.1 billion in 2013. The growth in revenues was principally attributable to strong revenue growth in our Oil & Gas business and steady revenue growth in Power & Water.

Cost of sales, including the impairment, was AED 23.3 billion, an increase of 10.2% over 2013.

Our key focus during the year has been to reshape and simplify the business, to increase accountability and improve line management. Our transition from a business stream model to a geographic model has eliminated a layer of executive management and devolved responsibility directly to regional leaders.

In the current business environment, careful stewardship of cash is more important than ever. We have therefore implemented a significant cost reduction programme, and have continued to rigorously assess our capital expenditure to make sure we are investing capital where it will have the greatest impact.

In 2014, we reduced capital expenditure by 23% in comparison to 2013 and are targeting a further 39% reduction in 2015 to just over US$1 billion.

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Cash flow StatementNet cash earned from operating activities was AED 11.9 billion in 2014, compared to AED 12.5 billion in 2013.

Net cash used in investing activities was AED 5.3 billion in 2014, compared to AED 6.9 billion in 2012.

Balance SheetTAQA’s total assets at the end of 2014 stood at AED 115.0 billion compared to AED 121.9 billion for 2013, reflecting both the disposal of non-core assets and the impairment taken during the year.

Total equity was AED 8.9 billion for 2014. The reduction from AED 12.3 billion in 2013 was driven by the impairment taken during the year.

In May TAQA repaid US$1.2 billion of bonds maturing in September 2014 by issuing US$750 million senior notes due in May 2024, a Euro 180 million 10-year private placement and arranging a US$200 million equivalent Samurai term loan facility.

We have strong liquidity, with AED 15 billion of unused credit facilities and cash and cash equivalents as at 31 December 2014. Of this, consolidated cash and cash equivalents was AED 3.5 billion.

We remain committed to reducing our leverage over time and over the course of 2014 reduced levels of net debt by AED 2.7 billion, or 3.5%, to AED 72.9 billion. This has been achieved by using excess cash flow and proceeds from the disposal of non-core assets, including AED 534 million from the disposal of undeveloped land in Alberta, Canada, and an interest in Carlyle Infrastructure Partners L.P.

As a result of our focus on cash and efficiencies, our credit metrics improved over the year, with overall Net Debt/EBITDA reducing to 5.0x from 5.6x in 2013, and EBITDA/Interest expense increasing to 3.5x from 2.8x in 2013.

EBITDAEBITDA grew by 7.7% to AED 14.5 billion, reflecting both the increase in revenues during the period and our focus on improving operational efficiencies and cutting unnecessary expenditure.

Finance CostsIn line with an overall reduction in indebtedness, our financing costs reduced from AED 5.1 billion in 2013 to AED 4.8 billion in 2014.

ProfitabilityThe Loss Before Tax was AED 1.7 billion in 2014 compared to AED 1.1 billion in 2013. The increased loss reflects the impact of the impairment taken during 2014. Excluding impairments, we generated a profit of AED 257 million compared with a profit of AED 180 million in 2013.

ImpairmentThe material drop in oil prices during the second half of 2014 had significant implications for the valuation of oil and gas assets, leading to a pre-tax impairment of AED 3.8 billion (AED 3.2 billion post-tax). However, the impairment charge is non-cash and has no impact on TAQA’s ability to meet its obligations, including the service of its ongoing debt obligations.

Net loss and dividendWe reported a net loss of AED 3.0 billion attributable to equity holders in 2014, compared to a net loss of AED 2.5 billion in 2013. The basic and diluted loss per share attributable to equity holders was AED 0.50, compared to a loss of AED 0.42 per share in 2013.

As a consequence of this loss, we will not be paying a dividend for 2014.

Revenues (AED million)

2012: 27,785

2013: 25,757

2014: 27,325

EBITDA (AED million)

2012: 13,132

2013: 13,445

2014: 14,476

25

Annual Report 2014

2012

2013

2014

Recordable Injury Rate(per 200,000 hrs.)

Total

2014: 0.332013: 0.392012: 0.36

2014: 0.512013: 0.592012: 0.53

2014: 0.062013: 0.212012: 0.14

Oil & Gas P&W

2012

2013

2014

Total

2014: 0.092013: 0.092012: 0.11

2014: 0.122013: 0.102012: 0.15

2014: 0.042013: 0.082012: 0.06

Oil & Gas P&W

Lost Time Injury Rate(per 200,000 hrs.)

HEALTH, SAFETY, SECURITY & ENVIRONMENT

Health, safety, and security at work and protection of the environment remain top priorities for TAQA.

We have a business-focused model where our regional HSSE teams help facilitate Leadership to deliver excellence in HSSE. This combined with a strongly networked HSSE community around the TAQA world means that we build on best learnings and hence continuous improvement in HSSE. TAQA Group HSSE facilitates these networks and drives the setting of our governance model and our management system standards which means that we, as a minimum, meet local and international regulatory requirements, and in many cases move beyond them.

2014 HSSE performance TAQA regularly monitors and reviews its Global HSSE performance. In 2014, TAQA injury rates reached the lowest level ever, as measured in our RIR metric. This is the outcome of a team approach where the TAQA safety culture is continuously improving as a result of all our teams working together to prevent loss, be it relating to people, environment, asset or reputation.

TAQA in the UK 2014 was a challenging year for TAQA’s North Sea business, as we suffered the loss of a colleague through a fatal accident at our Harding installation in February. The investigation into the causes and contributory factors of the tragedy have resulted in a reiteration of the Company’s drive to continually improve its safety performance through compliance with safety procedures, and verification of such through active supervision and audit.

2014 highlightsGas Storage Bergermeer Project With more than 4 million man hours expended, and the last 2.3 million LTI free, the Gas Storage Bergermeer team can be proud of their safety achievements. The highest risk phase of the project, where construction, commissioning, drilling and operations activities were concurrent, made the achievement of one year without a recordable injury especially impressive. Project management and staff will need to maintain their focus on transitioning through the project close-out and creating a safe and sustainable business.

Hadi Al BadiGroup Vice President HSSE

TAQA has seen significant challenges in 2014 with a changing business portfolio, including emerging areas of operation like Iraq and the Sorang Project in India where we have effectively managed significant Security and HSE issues through a prudent approach to managing risk. This has been complemented by our steadfast approach to continuous improvement in all our areas of operation.

26


2012

2013

2014

Total

2014: 662013: 502012: 51

2014: 642013: 482012: 49

2014: 22013: 22012: 2

Oil & Gas P&W

Reportable Spills

Safety Perception survey In 2014 TAQA implemented an improvement plan in each of its businesses to address the insights received from a Safety Perception survey completed in Q4 2013. All people working for TAQA across the globe had the opportunity to express their thoughts on safety. There was a 66% response rate with feedback highlighting where things were going well and where there were potential areas for improvement. The survey follow up will help to further build TAQA’s safety culture.

Health and wellbeingThe health and wellbeing of the TAQA workforce play an important part in day-to-day business. A number of different health promotion activities took place across the TAQA locations throughout 2014. These ranged from Lunch & Learn events covering a wide array of topics like smoking cessation, healthy diet and work-life balance, to information days and free health checks.

Power & WaterTAQA’s Power businesses had a busy year implementing an improved approach to near miss reporting which involved increased visibility of management safety tours together with campaigns around the need to learn from near misses. This approach resulted in better quality reporting and a significant improvement in the number of reported near misses.

Security Corporate Security continued to provide TAQA High Risk Environment Awareness Training; and the Iraq business received Relative Response Training.

A successful evacuation was conducted from Kurdistan in August, as a result of the security situation in Iraq . People from a number of TAQA locations worked together to make the evacuation a success. Following the evacuation, Corporate Security now produce a regular Situation Report, an overview of the Iraq security situation.

HSSE Case StudySafe Business is Good Business – Process Safety Training in the UK

Building on the Intelligent Safety behavioural and cultural change programme in 2013, TAQA’s UK business took the next step towards operational excellence by strengthening their process safety management around people, process and plant.

A schedule of training events for managers and supervisors across all disciplines brought process safety and the prevention of major accident hazards to the fore. The two-day event included a visit to the RAF Spadeadam test and training facility, where attendees had the opportunity to experience in a safe environment various jet fires and explosions which represented minor versions of potential major accidents in the oil and gas industry.

• Do we understand what could go wrong?• Do we know what systems are in place to

prevent this happening?• Are we getting the right information to

assure us that the systems are working effectively?

The next steps involve measuring the performance of process safety management, to drive improvements and move TAQA closer to operational excellence.


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We are committed to supporting the economic and social development of our local communities.

TAQA strives to ensure that we have a positive influence upon the communities in which we operate. That means developing a sustainable, long-term business that has a meaningful impact on the economic and social development.

Social responsibilityEach of our operations has a community investment strategy, which is tailored to the needs of its local community.

In Iraq, we support a women’s centre in the Chamanke Sub-District, which is close to our Atrush concession. As a result of our funding, the centre was able to reopen and is now a strong positive contributor to the local community. It provides women the chance to study foreign languages and learn new skills, providing better employment opportunities.

Health The health and wellbeing of our employees and the wider community is of paramount importance to TAQA. We work hard to ensure that our local communities also benefit from our support and assistance.

In Morocco, we operate a mobile medical centre, which provides access to medical and health care for rural communities. In 2014, over 800 people benefited from medical support.

TAQA is a strong supporter of the Alberta Children’s Hospital. Our employees offer their time to the hospital’s various events such as the Caring for Kids Radiothon. All money raised by the Alberta Children’s Hospital Foundation is reinvested in regional child health needs.

EducationTAQA recognises that education can empower the next generation and is vital for the future development of our societies.

In 2014, TAQA continued to attract Emirati interns in Canada. Internships are a valuable opportunity for students to get practical work experience in the industry.

By providing these educational opportunities, TAQA aims to positively impact the students’ understanding of the oil and gas industry, giving them an insight into what a potential career in the industry might entail.

In Ghana, TAQA supported the Secondi School for the Deaf. The school is 10 minutes from TAQA’s Takoradi 2 Power Station and provides food and education to more than 300 boys and girls aged 4-16.

In Morocco, TAQA’s community investment programme includes refurbishing schools in the surroundings of its operations in El Jadida. In 2014, TAQA refurbished five disadvantaged schools, providing better educational facilities.

EnvironmentUnderstanding our impact on the environment is one of our core values and we support many environmental initiatives in our local communities.

At Gas Storage Bergermeer, we have continued to work hard with local environmental partners to ensure that we minimise the project’s impact on the environment. Since 2009, we have acquired land to develop new nesting areas for birds affected by the construction phase of the project. In 2014, these areas have been transformed to provide a safe habitat for nesting and breeding.

Our UK operations continued their partnership with the Royal Society for the Protection of Birds (RSPB) – a wildlife conservation charity. In 2014, TAQA worked with the charity to create an ‘outdoor learning programme’ which will be introduced to all schools in Aberdeen and the surrounding area during 2015. The aim of the programme is to introduce children to nature in a way that is meaningful and practical, and which will enable them to build upon and develop their knowledge of the natural world and carry it with them into their adult lives.

COMMUNITY RELATIONS28


CORPORATE GOVERNANCE

As a public company, we continually strive for the highest standards of corporate governance. TAQA’s Corporate Governance Policy and Code of Business Ethics together form the backbone of the Company’s governance practices and serve to define and reinforce the core values of TAQA as an organisation.

Structure of BoardTAQA’s Board of Directors comprises seven (7) directors with a broad range of backgrounds, expertise and commercial experience. Each director is elected for a term of three (3) years and at the end of that period, the Board may be reconstituted. The Board is formed taking into consideration an appropriate balance between executive, non-executive and independent directors. At all times, at least one third of the directors are to be independent and a majority of directors are to be non-executives who have technical skills and experience that will be of benefit to TAQA. Whenever directors are chosen, consideration is given to whether or not a director is able to dedicate adequate time and effort to his membership and that such membership is not in conflict with his or her other interests. The Board meets in person on a periodic basis pursuant to a formal schedule.

New Board members were elected during the Company’s Annual General Assembly which convened on 22 April 2014. At a meeting of the Board held on the same date, H.E. Saeed Mubarak Al Hajeri was elected Chairman.

Board CommitteesPresently the Board has the following three (3) committees, each of which has been established by a written charter setting forth its scope and responsibilities:

• Audit Committee;

• Nomination and RemunerationCommittee; and

• Executive Committee

Audit CommitteeThe basic duties of the Audit Committee are monitoring the integrity of the Company’s financial statements and its reports (annual reports, semi-annual reports, and quarterly reports) and reviewing the financial and accounting policies and procedures of the Company, as well as ensuring the independence of the Company’s external auditor. It is also responsible for evaluating the integrity and quality of the Company’s internal control policies and all the duties mentioned in Article (9) of Ministerial Resolution 518, and those indicated further below.

The Audit Committee is comprised of:

1. H.E. Salem Sultan Al Dhaheri(Chairman) – Independent Non-Executive Member

2. H.E. Abdulaziz AbdulrahmanAl-Hemaidi - Independent Non-Executive Member

3. H.E. Ahmed Khalifa Al Mehairi- Independent Non-Executive Member

The Committee convenes at least once every three (3) months and whenever the need arises. The minutes of the Audit Committee meetings are signed by all the Committee members. The Company undertakes to provide sufficient and necessary resources for the Committee to perform its duties, including authorising it to seek the assistance of experts whenever necessary. The establishment of the Audit Committee was approved by a resolution of the Board of Directors in a meeting held on 30 October 2007, and the Committee’s Charter was adopted on 9 December 2007.

Nomination and Remuneration CommitteeThe basic duties of the Nomination and Remuneration Committee are to regularly ensure the independence of the independent Board members, to review the remuneration matters related to the Company, and to nominate members of the Board of Directors and determine their remuneration and all the basic duties included in Article (6) of Ministerial Resolution 518.

The Nomination and Remuneration Committee is comprised of:

1. H.E. Mohamed Butti Al Qubaisi(Chairman) – Independent Non-Executive Member

2. H.E. Khaled Abdulla Al Mass – Independent Non-Executive Member

3. H.E. Mohamed Abdul RahmanAl Qamzi – Independent Non-Executive Member


29

The establishment of the Nomination and Remuneration Committee was approved by a resolution by the Board of Directors in a meeting held on 20 January 2008, and the Committee’s Charter was amended in February 2012.

Executive CommitteeThe Executive Committee is a new committee with the purpose of assisting the Board in fulfilling its responsibilities and to act as an advisor to the Board to review, assess and propose recommendations for the overall management, strategy, business and affairs of the Company. The Executive Committee is also responsible for the implementation and execution of strategic transactions and the approval of Company investments.

The Executive Committee is comprised of:

1. H.E. Saeed Mubarak Al-Hajeri (Chairman) – Independent Non-Executive Member

2. H.E. Abdulaziz Abdulrahman Al-Hemaidi – Independent Non-Executive Member

3. H.E. Mohamed Butti Al Qubaisi – Independent Non-Executive Member

The establishment of the Executive Committee was approved by a resolution by the Board of Directors in a meeting held on 17 June 2014, and the Committee’s Charter was adopted on 17 June 2014.

Internal controlsThe Company’s internal controls are processes designed to achieve the (i) effectiveness and efficiency of operations; (ii) reliability of financial reporting; and (iii) compliance with laws and regulations. There are two main components of the Company’s internal control system:

a) The design, development and implementation of an effective internal control system; and

b) The ongoing monitoring and review of the internal control system to test its fitness for purpose, and to confirm that the business is in compliance with it.

The Company’s internal controls are contained in the policies, procedures and systems that have been adopted by the Company and that are managed and implemented through a multi-disciplinary group. Ultimate responsibility for the operation of an effective internal control framework rests with the Chief Operating Officer, who provides the leadership and direction to those within the organisation with more direct responsibility for the specific aspects of the internal control system, and who has accountability to the Board for these matters.

The Group Vice President of Assurance and Internal Control and Compliance Officer is responsible for overseeing the Internal Audit and the Internal Controls functions with a direct reporting line to the Audit Committee and is ultimately accountable to the Board. He is primarily and directly responsible for auditing the Company’s internal controls to confirm that they are adequate for their intended purpose, for identifying and reviewing any perceived shortfalls or weaknesses in the internal controls, and for testing compliance with the internal control framework.

The Company’s Internal Audit Group has responsibility for testing the adequacy of the internal control system and verifying compliance with its requirements. The Internal Audit Group prepares annual audit plans pursuant to which it audits and reviews specific functions and activities within the Company and its subsidiaries. These annual audit plans are agreed with the Audit Committee. They are designed to prioritise potential areas of risk with a view to allocating Internal Audit Group resources to those areas of most strategic importance to the Company, to ensure that all material functions and activities of the Company are periodically audited and reviewed, and to support the Company’s overall risk assessment procedures.

The Company has implemented processes to assist in the identification of problems, including the Anti-Fraud Policy and the Whistleblower Policy, both of which provide a mechanism for anonymous reports to be made if improper actions are

suspected. The General Counsel is responsible for addressing issues raised through these reporting mechanisms, with the response being tailored to the nature of an allegation. The response to all of these problems or potential problems is documented in writing, with any material matters brought to the attention of the Audit Committee and, if appropriate, the Board.

Finally, the Company has adopted a Crisis and Emergency Management Plan to address major issues that may occur with little or no warning. This plan provides for a staged response depending upon the severity of the crisis or emergency. For the most significant matters, the process calls for the involvement of most members of senior management, regular briefings of the Board, and timely communication to all other relevant stakeholders. The Company has dedicated resources to address these types of matters and implements periodic training, including real crisis simulations, to ensure that if a real crisis or emergency arises, processes and procedures are well understood and can be implemented quickly and efficiently.

Appointment of external auditors and feesPursuant to Article (10) of Ministerial Resolution 518, the Board appoints an external auditor, based on the recommendation of the Audit Committee. At the General Assembly meeting held on 22 April 2014, and based on the recommendation of the Board of Directors, the shareholders appointed Ernst & Young (Abu Dhabi) as the Company’s external auditors for the fiscal year 2014, and approved their annual audit fees at AED 600,000. No company other than Ernst & Young and its affiliates provided external audit services to the Company for 2014.

In addition to fees for audit work, Ernst & Young and/or its affiliates were paid AED 1,469,200 for the Company’s bond refinancing, and AED 151,920 for other advisory fees.

30


SHAREHOLDER & BONDHOLDER INFORMATION

Bondholder informationLong-term credit ratingsMoody’s Investor Services A3 (stable outlook)Standard & Poor’s A (stable outlook)

Professional AdvisorsAuditorsErnst & YoungPO Box 136Abu DhabiUnited Arab EmiratesT +971 (0) 2 627 7522F +971 (0) 2 627 3383

Registrars National Bank of Abu DhabiPO Box 2993 T +971 (0) 2 611 1111F +971 (0) 2 627 5738

Contact detailsMailing addressAbu Dhabi National Energy CompanyPJSC “TAQA”PO Box 55224Abu DhabiUnited Arab EmiratesT +971 (0) 2 691 4900F +971 (0) 2 642 2555www.taqaglobal.comFor information on investor relations email:[email protected]

Mohammed MubaideenHead of Investor Relations Direct: +971 (0) 2 691 4964

Bond maturity schedule

Issue size Maturity CouponUS$1,000 million October 2016 5.875%US$750 million March 2017 4.125%US$500 million October 2017 6.165%US$750 million January 2018 2.500%US$500 million August 2018 7.250%US$500 million September 2019 6.250%US$750 million December 2021 5.875%MYR 650 million March 2022 4.650%US$1,250 million January 2023 3.625%US$750 million May 2024 3.875%EUR 180 million May 2024 2.875%US$913 million October 2036 6.500%

ADX rebased to TAQA share price of 1.45 as at 1 January 2014.

31


Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Dec-14

1.9

1.7

1.5

1.3

1.1

0.9

0.5

0.7

0.3

Shareholder information TAQA relative share price performance 2014

TAQA ADXI

FINANCIAL STATEMENTS

33 Board Report34 Independent Auditor’s Report35 Consolidated Income Statement36 Consolidated Statement of Comprehensive Income37 Consolidated Statement of Financial Position38 Consolidated Statement of Changes in Equity40 Consolidated Statement of Cash Flows42 Notes to the Consolidated Financial Statements

REPORT OF THE BOARD OF DIRECTORS ANDCONSOLIDATED FINANCIAL STATEMENTS31 DECEMBER 2014

32 Financial statements


ABU DHABI NATIONAL ENERGY COMPANY PJSC “TAQA” BOARD REPORT

On behalf of the Board of Directors of Abu Dhabi National Energy Company PJSC (“TAQA” or the “Company”), I am pleased to present the financial statements of TAQA for the year ended 31 December 2014.

TAQA was established pursuant to Emiri Decree No. 16 of 2005 as a public joint stock company with Abu Dhabi Water and Electricity Authority (“ADWEA”) as its founding shareholder holding a 52.4% equity interest. Accordingly, the Company is a subsidiary of ADWEA.

TAQA’s revenues grew to AED 27.3 billion, an increase of 6.1% compared to 2013. It continued to generate strong operational cash flows, with EBITDA rising 7.7% to AED 14.5 billion. The Company recorded a net loss of AED 3.0 billion following a non-cash impairment of AED 3.3 billion, post-tax. The impairment reflected the rapid reduction in oil and gas prices in the second half of 2014. The lower commodity prices have reduced price expectations in mid and long term which has had a profound implication for the entire oil and gas industry. As a consequence, TAQA is not paying a dividend for 2014. In terms of liquidity, TAQA holds AED 3.6 billion in cash and cash equivalents and maintains undrawn facilities of AED 10.8 billion.

During 2014, TAQA changed its organisational structure from a business stream based model to a geographical model. The new structure eliminated a layer of executive management and devolved responsibility directly to regional leaders with a clearer mandate. The direct reporting lines between the regions and senior leadership simplified communication and increased accountability. This allowed the Company to maintain its focus on safety and reliability and introduce significant operational enhancements, particularly in cost rationalisation.

In 2014, TAQA initiated a transformation programme across the business with the goal to reduce operational expenditure and G&A costs by AED 1.5 billion over a two-year period. TAQA has also reduced its capital expenditure budget for 2015 by AED 2.5 billion representing 39% reduction over 2014.

TAQA’s power and water portfolio delivered underlying revenues of AED 9.1 billion, a 1.2% increase compared to 2013. This resulted in EBITDA of AED 7.0 billion.

TAQA realised record gross power production of 82,723 gigawatt hours (GWh) and 260,100 million imperial gallons (MIG) of water due to new Jorf Lasfar expansion and strong global technical availability of 91.2%.

The Company’s oil and gas businesses delivered revenues of AED 13.9 billion, up 14% on 2013. EBITDA for the year was AED 7.7 billion, showcasing strong operational cash flow.

TAQA’s oil and gas businesses produced a record 158.9 thousand barrels of oil equivalent per day (mboed). North America delivered 89.5 mboed which was due to new well performance and improved operational reliability.

The UK increased production by 14.5 mboed to 61.4 mboed, due to better reliability and the successful integration of the Harding hub in the North Sea, which was acquired in June 2013.

The Company has made significant progress delivering its three major projects. In Morocco, TAQA added 700 MW of capacity at its Jorf Lasfar power station. In the Netherlands, it commenced commercial operations at Gas Storage Bergermeer, successfully injecting gas and committing to customers throughout the year. At the Atrush development in the Kurdistan Region of Iraq, TAQA has commenced the facility construction and

completed the drilling of the wells required for the first phase production of 30,000 barrels of oil per day.

TAQA has several projects due to come on line in 2015. The expansion of its Takoradi 2 power plant in Ghana will increase capacity by 50% to 330 MW without additional fuel or emissions and its 100 MW Sorang hydro plant will start delivering power in Northern India.

TAQA remains committed to developing UAE nationals through various initiatives and development programmes which has increased the number of UAE nationals in Abu Dhabi-based senior leadership roles from 18% to 43% over the past year.

The strategic and operational actions taken by the new Board and executive management team across the business have strengthened the Company and ensured that it is better placed to take on challenges facing the Company in 2015.

Saeed Mubarak Al-HajeriChairman of the BoardAbu Dhabi National Energy Company PJSC “TAQA”

33


INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF ABU DHABI NATIONAL ENERGY COMPANY PJSC (“TAQA”)

Report on the Consolidated Financial StatementsWe have audited the accompanying consolidated financial statements of Abu Dhabi National Energy Company PJSC (“TAQA”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2014 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and the applicable provisions of the articles of association of the Company and the UAE Commercial Companies Law of 1984 (as amended), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that

we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2014 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory RequirementsWe also confirm that, in our opinion, the consolidated financial statements include, in all material respects, the applicable requirements of the UAE Commercial Companies Law of 1984 (as amended) and the articles of association of the Company; proper books of account have been kept by the Company; an inventory was duly carried out and the contents of the report of the Board of Directors relating to these consolidated financial statements are consistent with the books of account. We further report that we have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the UAE Commercial Companies Law of 1984 (as amended) or of the articles of association of the Company have occurred during the year, which would have had a material effect on the business of the Company or on its financial position.

Signed by

Anthony O’SullivanPartnerErnst & YoungRegistration No. 687



CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2014

Notes2014

AED million2013

AED million

RevenuesRevenue from oil and gas 4.1 12,066 10,787Revenue from electricity and water 4.2 9,372 10,015Fuel revenue 4.3 3,789 3,209Gas storage revenue 312 213Other operating revenue 4.4 1,786 1,533

27,325 25,757

Cost of salesOperating expenses 5 (11,905) (11,346)Depreciation, depletion and amortisation 6 (6,942) (6,229)Dry hole expenses 15 (640) (348)Provisions for impairment 7 (3,837) (3,247)

(23,324) (21,170)

Gross profit 4,001 4,587Administrative and other expenses 8 (1,098) (1,199)Finance costs 9.1 (4,849) (5,087)Changes in fair values of derivatives and fair value hedges (243) 41Net foreign exchange gain (losses) 142 (186)Bargain purchase gain – 49Share of results of associates 17 123 128Share of results of a joint venture 18 31 105Gain on sale of land and oil and gas assets 12(ii) 167 101Interest income 9.2 17 100Gain on disposal of a joint venture 18(i) – 54Other investment income – 80Other gains and losses 22 120

Loss before tax (1,687) (1,107)Income tax expense 10 (602) (661)

Loss for the year (2,289) (1,768)

Attributable to:Equity holders of the parent (3,010) (2,519)Non-controlling interests 721 751


Basic and diluted loss per share attributable to equity holders of the parent (AED) 11 (0.50) (0.42)

The attached notes 1 to 43 form part of these consolidated financial statements.

35


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2014

2014AED million

2013AED million


Other comprehensive incomeOther comprehensive income to be reclassified to profit or loss in subsequent periods:Changes in fair values of derivative instruments in cash flow hedges (2,105) 1,751Reclassification adjustment for losses included in the consolidated income statement (note 9.1) 1,449 1,505Reclassification adjustment for ineffective cash flow hedges (42) (24)Share of other comprehensive income (loss) of associates (note 17) 37 (47)Exchange differences arising on translation of overseas operations (254) (1,383)

Net other comprehensive (loss) income to be reclassified to profit or loss in subsequent periods (915) 1,802

Other comprehensive income not to be reclassified to profit or loss in subsequent periods:Changes in fair value relating to investment carried at FVOCI (79) (21)Board of Directors’ remuneration – (6)Remeasurement (losses) gains on defined benefit plans (24) 8

Net other comprehensive loss not to be reclassified to profit or loss in subsequent periods (103) (19)

Other comprehensive (loss) income for the year (1,018) 1,783

Total comprehensive (loss) income for the year (3,307) 15

Attributable to:Equity holders of the parent (3,758) (2,171)Non-controlling interests 451 2,186

(3,307) 15




CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2014

Notes2014

AED million2013

AED million

AssetsNon-current assetsProperty, plant and equipment 12 79,824 81,654Operating financial assets 13 10,147 9,977Investment carried at FVOCI 14 2 583Intangible assets 15 10,532 14,274Investment in associates 17 726 592Investment in joint venture 18 151 144Advance and loans to associates 19 398 398Deferred tax asset 10 547 494Other assets 20 236 480

102,563 108,596

Current assetsInventories 21 2,963 2,732Operating financial assets 13 228 342Advance and loans to associates 19 475 583Accounts receivable and prepayments 22 5,157 5,632Cash and short-term deposits 23 3,652 4,040

12,475 13,329

Total assets 115,038 121,925

Equity and liabilitiesEquity attributable to equity holders of the parentIssued capital 24.1 6,066 6,225Treasury shares 24.2 – (293)Contributed capital 24.3 25 325Other reserves 25.1 3,485 4,290Accumulated losses (530) (1,375)Foreign currency translation reserve (1,448) (1,194)Cumulative changes in fair value of investment carried at FVOCI – 68Cumulative changes in fair value of derivatives in cash flow hedges (2,984) (2,593)

4,614 5,453

Non-controlling interests 27 3,581 3,595Loans from non-controlling interest shareholders in subsidiaries 28 589 642Loan from Abu Dhabi Water and Electricity Authority (ADWEA) 29 – 2,624

4,170 6,861

Total equity 8,784 12,314

Non-current liabilitiesInterest bearing loans and borrowings 30 72,380 71,058Islamic loans 31 1,918 2,112Deferred tax liabilities 10 3,643 4,131Asset retirement obligations 32 13,143 12,196Advances and loans from related parties 33 285 109Loans from non-controlling interest shareholders in subsidiaries 260 185Other liabilities 34 4,921 4,232

96,550 94,023

Current liabilitiesAccounts payable, accruals and other liabilities 35 6,423 7,970Interest bearing loans and borrowings 30 2,059 6,272Islamic loans 31 148 143Loans from non-controlling interest shareholders in subsidiaries 2 20Amounts due to ADWEA and other related parties 36 97 453Income tax payable 853 636Bank overdrafts 23 122 94

9,704 15,588

Total liabilities 106,254 109,611

Total equity and liabilities 115,038 121,925

Chairman of the Board of Directors

Chairman of the Audit Committee Chief Operating Officer Chief Finanial Officer


37


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2014

Attributable to owners of the parent Attributable to owners of the parent

Issued capital

AED million

Treasury shares

AED million

Equity contributed

capitalAED million

Other reserves

AED million

Retained (losses)

earningsAED million

Proposed dividendscarried at

AED million

Foreigncurrency

translationreserve

AED million

Cumulativechanges in

fair value ofinvestment

carried atFVOCI

AED million


fair value ofderivative

for cash flowhedges

AED millionTotal

AED million

Non-controllinginterests

AED million

Loans fromnon-controlling

interestshareholders

in subsidiariesAED million

Loan fromADWEA

AED million

Totalequity

AED million

Balance at 1 January 2013 6,225 (293) 325 4,188 1,005 607 189 89 (4,343) 7,992 1,687 979 2,655 13,313(Loss) profit for the year – – – – (2,519) – – – – (2,519) 751 – – (1,768)Other comprehensive income (loss) for the year – – – – 2 – (1,383) (21) 1,750 348 1,435 – – 1,783

Total comprehensive income (loss) for the year – – – – (2,517) – (1,383) (21) 1,750 (2,171) 2,186 – – 15Transfer to legal reserve – – – 102 (102) – – – – – – – – –Adjustment on repayment of interest free loan by partially ownedsubsidiary (note 25.2) – – – – 35 – – – – 35 (35) – – –Changes in ownership interest in subsidiaries (note 25.2) – – – – 204 – – – – 204 454 – – 658Dividends paid (note 26) – – – – – (607) – – – (607) – – – (607)Dividends paid and capital returned to subsidiaries’ non-controlling interests – – – – – – – – – – (697) – – (697)Repayment of loans – – – – – – – – – – – (337) (31) (368)

Balance at 31 December 2013 6,225 (293) 325 4,290 (1,375) – (1,194) 68 (2,593) 5,453 3,595 642 2,624 12,314(Loss) profit for the year – – – – (3,010) – – – – (3,010) 721 – – (2,289)Other comprehensive loss for the year – – – – (24) – (254) (79) (391) (748) (270) – – (1,018)

Total comprehensive income (loss) for the year – – – – (3,034) – (254) (79) (391) (3,758) 451 – – (3,307)Transfer to retained earnings (note 24.3 and note 25.1) – – (300) (750) 1,050 – – – – – – – – –Transfer to legal reserve (note 25.1) – – – 79 (79) – – – – – – – – –Cancellation of loans from ADWEA (note 25.2) – – – – 2,919 – – – – 2,919 50 – (2,611) 358Transfer of cumulative loss on investment carriedat FVOCI to retained earnings (note 14) – – – – (11) – – 11 – – – – – –Dividends declared to subsidiaries’non–controlling interests – – – – – – – – – – (515) – – (515)Cancellation of treasury shares (note 24.1, note 24.2 & note 25.1) (159) 293 – (134) – – – – – – – – – –Repayment of loans – – – – – – – – – – – (53) (13) (66)

Balance at 31 December 2014 6,066 – 25 3,485 (530) – (1,448) – (2,984) 4,614 3,581 589 – 8,784




Attributable to owners of the parent Attributable to owners of the parent

Issued capital

AED million

Treasury shares

AED million

Equity contributed

capitalAED million

Other reserves

AED million

Retained (losses)

earningsAED million

Proposed dividendscarried at

AED million

Foreigncurrency

translationreserve

AED million


fair value ofinvestment

carried atFVOCI

AED million


fair value ofderivative

for cash flowhedges

AED millionTotal

AED million

Non-controllinginterests

AED million

Loans fromnon-controlling

interestshareholders

in subsidiariesAED million

Loan fromADWEA

AED million

Totalequity

AED million

Balance at 1 January 2013 6,225 (293) 325 4,188 1,005 607 189 89 (4,343) 7,992 1,687 979 2,655 13,313(Loss) profit for the year – – – – (2,519) – – – – (2,519) 751 – – (1,768)Other comprehensive income (loss) for the year – – – – 2 – (1,383) (21) 1,750 348 1,435 – – 1,783

Total comprehensive income (loss) for the year – – – – (2,517) – (1,383) (21) 1,750 (2,171) 2,186 – – 15Transfer to legal reserve – – – 102 (102) – – – – – – – – –Adjustment on repayment of interest free loan by partially ownedsubsidiary (note 25.2) – – – – 35 – – – – 35 (35) – – –Changes in ownership interest in subsidiaries (note 25.2) – – – – 204 – – – – 204 454 – – 658Dividends paid (note 26) – – – – – (607) – – – (607) – – – (607)Dividends paid and capital returned to subsidiaries’ non-controlling interests – – – – – – – – – – (697) – – (697)Repayment of loans – – – – – – – – – – – (337) (31) (368)

Balance at 31 December 2013 6,225 (293) 325 4,290 (1,375) – (1,194) 68 (2,593) 5,453 3,595 642 2,624 12,314(Loss) profit for the year – – – – (3,010) – – – – (3,010) 721 – – (2,289)Other comprehensive loss for the year – – – – (24) – (254) (79) (391) (748) (270) – – (1,018)

Total comprehensive income (loss) for the year – – – – (3,034) – (254) (79) (391) (3,758) 451 – – (3,307)Transfer to retained earnings (note 24.3 and note 25.1) – – (300) (750) 1,050 – – – – – – – – –Transfer to legal reserve (note 25.1) – – – 79 (79) – – – – – – – – –Cancellation of loans from ADWEA (note 25.2) – – – – 2,919 – – – – 2,919 50 – (2,611) 358Transfer of cumulative loss on investment carriedat FVOCI to retained earnings (note 14) – – – – (11) – – 11 – – – – – –Dividends declared to subsidiaries’non–controlling interests – – – – – – – – – – (515) – – (515)Cancellation of treasury shares (note 24.1, note 24.2 & note 25.1) (159) 293 – (134) – – – – – – – – – –Repayment of loans – – – – – – – – – – – (53) (13) (66)

Balance at 31 December 2014 6,066 – 25 3,485 (530) – (1,448) – (2,984) 4,614 3,581 589 – 8,784


39


CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2014

Notes2014

AED million2013

AED million

Operating activitiesLoss before tax (1,687) (1,107)Adjustments for:

Depreciation, depletion and amortisation 6 6,942 6,229Amortisation of deferred expenditure 68 63Release of onerous contracts provision (84) (116)Employee benefit obligations, net (16) (22)Loss on exchange - loans and borrowings and operating financial assets (81) 122Provisions for impairment 7 3,837 3,247Dry hole expenses 15 640 348Exploration and evaluation costs derecognised during the year 15 84 45Bargain purchase gain – (49)Gain on sale of land oil and gas assets 12(ii) (167) (101)Gain on disposal of a joint venture 18(i) – (54)Interest expense and notional interest 9.1 4,167 4,512Accretion expense 9.1 682 575Share of results of associates 17 (123) (128)Share of results of a joint venture 18 (31) (105)Unrealised losses on fair valuation of derivatives and fair value hedges 154 74Interest income 9.2 (17) (100)Other investment income – (80)Other non-cash adjustments 10 (97)Construction costs 5 404 1,353Revenue from operating financial assets 13 (1,954) (2,649)

Working capital changes:Inventories (258) 209Account receivables and prepayments and other assets 198 (264)Amount due to ADWEA and other related parties (53) 28

Accounts payables, accruals and other liabilities (1,493) 917Income tax paid (693) (1,150)Board of Directors’ remuneration paid – (6)Asset retirement obligations payments 32 (132) (170)Cash received from service concession arrangements 13 1,491 928

Net cash from operating activities 11,888 12,452




CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2014CONTINUED

Notes2014

AED million2013

AED million

Investing activitiesProceeds from sale of non-core assets 298 317Proceeds from insurance claims 58 –Proceeds from sale of joint venture 18 (i) – 814Purchase of property, plant and equipment (5,333) (5,554)Construction costs paid (404) (1,262)Purchase of businesses – (875)Dividends received from investment carried at FVOCI 4 19Proceeds from disposal of investment carried at FVOCI 14 493 –Proceeds from disposal of an associate 13 –Return of capital/additions of investment carried at FVOCI 14 9 (12)Dividend received from associates 16 16Dividend received from joint ventures 25 208Loan repayment by associates 108 114Purchase of intangible assets 15 (597) (733)Interest received 17 100Acquisition of other assets (58) (36)

Net cash used in investing activities (5,351) (6,884)

Financing activitiesInterest bearing loans and borrowings received 4,897 11,924Repayment of Islamic loans (145) (134)Repayment of interest bearing loans and borrowings (6,930) (11,610)Interest paid (4,290) (4,616)Dividend paid to owners of the parent 26 – (607)Dividend paid to non-controlling interest shareholders (613) (700)Proceeds from share issue in subsidiary, net of transaction costs 25.2 – 658Loans received from non-controlling interest shareholders in subsidiaries 75 105Repayment of capital to non-controlling interest shareholders – (8)Repayment of loans from non-controlling interest shareholders (71) (342)Repayment of loans from ADWEA 195 (38)

Net cash used in financing activities (6,882) (5,368)

Net (decrease) increase in cash and cash equivalents (345) 200Net foreign exchange difference (71) (61)Cash and cash equivalents at 1 January 23 3,946 3,807

Cash and cash equivalents at 31 December 23 3,530 3,946


41


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS31 DECEMBER 2014

1 Corporate informationAbu Dhabi National Energy Company PJSC (“TAQA” or the “Company”) was established on 21 June 2005 pursuant to the provisions of Emiri Decree number 16/2005 as a public joint stock company with Abu Dhabi Water and Electricity Authority (“ADWEA”) as its founding shareholder and 100% owner. During the period from 23 July 2005 to 1 August 2005, 24.9% of TAQA’s shares were offered to the public on the Abu Dhabi Securities Exchange through an Initial Public Offering (IPO) and 24.1% were offered through a private offering with the remaining 51% interest holding in the Company retained by ADWEA and, accordingly, the Company is a subsidiary of ADWEA. Following the issuance of mandatory convertible bonds and conversion of the bonds into ordinary shares during the third quarter of 2008, ADWEA’s holding increased to 51.05%. Public ownership increased to 27.95% and the balance of 21% is held by the Farmers’ Fund. The Company continues to be a subsidiary of ADWEA which was established pursuant to the provisions of Law 2 of 1998, concerning the regulation of the Water and Electricity Sector.

The principal activity of TAQA is to own and invest in companies engaged in power generation, water desalination and exploration, development, production and storage of oil and gas, supplemented by developing alternative and technology-driven energy initiatives in addition to other investments as considered appropriate to meet its objectives. TAQA’s registered head office is PO Box 55224, Abu Dhabi, United Arab Emirates.

The consolidated financial statements of TAQA and its subsidiaries (“the Group”) for the year ended 31 December 2014 include the financial statements of TAQA and all its subsidiaries. Details of the major operating subsidiaries are provided in note 39 to the consolidated financial statements. Information on other related party relationships of the Group are provided in note 38.

The consolidated financial statements of the Group were authorised for issuance by the Board of Directors on 31 March 2015.

2.1 Basis of preparationThe consolidated financial statements of TAQA have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the applicable requirements of the UAE Commercial Companies Law 1984 (as amended).

The consolidated financial statements are prepared on a historical cost basis, except for investment carried at FVOCI financial assets and derivative financial instruments that have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships.

The consolidated financial statements have been presented in United Arab Emirates Dirhams (AED), which is also the functional currency and presentation currency of the parent Company. All values are rounded to the nearest million (AED million) except when otherwise indicated.

2.2 Basis of consolidationThe consolidated financial statements comprise the financial statements of the Company and each of its subsidiaries as at 31 December 2014.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee, and

• The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of an investee

• Rights arising from other contractual arrangements

• The Group’s voting rights and potential voting rights

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Total comprehensive income within a subsidiary is attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if that results in the non-controlling interests having a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.



2.3 Changes in accounting policies and disclosuresNew and amended standards and interpretationsThe accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of 1 January 2014 and not previously adopted by the Group:

IFRS 9 Financial Instruments (early adopted)In November 2009, IFRS 9 was issued which introduced new requirements for the classification and measurement of financial assets. It was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition. Under IFRS 9, all recognised financial assets that are within the scope of IAS 39 are required to be subsequently measured at either amortised cost or fair value.

Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. IFRS 9 also allows entities to make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

In November 2013, the IASB issued new IFRS 9 requirements related to hedge accounting (except accounting for open portfolio or macro hedging) which align hedge accounting more closely with risk management, resulting in more useful information to users of financial statements. The requirements also establish a more principal based approach to hedge accounting and address inconsistencies in the hedge accounting model in IAS 39.

The mandatory date of application of IFRS 9 is 1 January 2018. However, the Group has decided to early adopt IFRS 9 as at 1 January 2014. No retrospective adjustments were required as a result of early adopting IFRS 9.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact to the Group, since none of the entities in the Group qualifies to be an investment entity under IFRS 10.

Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32These amendments clarify the meaning of ’currently has a legally enforceable right to set-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments have no impact on the Group.

Recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36 These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the period. These amendments have no significant impact on the Group.

IFRIC 21 Levies IFRIC 21 is effective for annual periods beginning on or after 1 January 2014 and is applied retrospectively. It is applicable to all levies imposed by governments under legislation, other than outflows that are within the scope of other standards (e.g., IAS 12 Income Taxes) and fines or other penalties for breaches of legislation. The interpretation clarifies that an entity recognises a liability for a levy no earlier than when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is

triggered upon reaching a minimum threshold, no liability is recognised before the specified minimum threshold is reached. The adoption of IFRIC 21 did not have any impact on the Group.

Annual Improvements 2010–2012 Cycle In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six standards, which included an amendment to IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is effective immediately and, thus, for periods beginning at 1 January 2014, and it clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the Group.

Annual Improvements 2011–2013 CycleIn the 2011-2013 annual improvements cycle, the IASB issued four amendments to four standards, which included an amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 is effective immediately and, thus, for periods beginning at 1 January 2014, and clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This amendment to IFRS 1 has no impact on the Group, since the Group is an existing IFRS preparer.

2.4 Significant accounting judgements, estimates and assumptionsThe preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities, at the end of the reporting period. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS31 DECEMBER 2014 CONTINUED

2.4 Significant accounting judgements, estimates and assumptionsContinuedJudgementsIn the process of applying the Group’s accounting policies, management has made the following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements:

Service concession arrangementsSome of the Group’s foreign subsidiaries have entered into power purchase agreements (“PPAs”) with offtakers in countries where they are operating. Management has determined these arrangements to be service concession arrangements under IFRIC 12 Service Concession Arrangements by applying the requirements of the interpretation to the facts and circumstances in each location. The Group’s domestic (United Arab Emirates) subsidiaries have entered into long term Power and Water Purchase Agreements (“PWPAs”) with Abu Dhabi Water and Electricity Company (ADWEC). Management does not consider these PWPAs to fall within the scope of IFRIC 12 Service Concession Arrangements.

Operating lease commitments – Subsidiaries as lessorAs mentioned above, the Group’s domestic subsidiaries have entered into PWPAs. Under the PWPAs, the subsidiaries receive payment for the provision of power and water capacity, whether or not the offtaker (ADWEC) requests power or water output (“capacity payments”), and for the variable costs of production (“energy and water payments”). TAQA and the domestic subsidiaries have determined the PWPAs are lease arrangements and that, based on the contractual arrangements in place, management considers that the Group retains the principal risks and rewards of ownership of the plants and so accounts for the PWPAs as operating leases. When there are amendments to the PWPAs, for example extensions to the PWPA terms, management reconsiders whether the Group continues to retain the principal risks and rewards of ownership of the plants.

Recoverability of exploration and evaluation assetsExploration and evaluation assets are assessed for impairment when facts and circumstances suggest that their carrying amounts may exceed their recoverable amounts. The Group has determined that

the facts and circumstances suggest that the recoverable amount of the assets in oil and gas – Atrush will exceed their recoverable amounts, as the rights to explore will not expire in the near future, substantive expenditure on further exploration and evaluation is planned and budgeted, activity to date has led to the discovery of commercially viable quantities of oil and there is not sufficient data to indicate that the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or sale. Changes in these facts and expectations may result in testing of the asset and subsequent impairment charges being recognised.

Power and Water Purchase AgreementsAs mentioned above, management does not consider the domestic subsidiaries’ PWPAs to fall within the scope of IFRIC 12 Service Concession Arrangement. Based on management’s estimate of the useful lives and residual values of the assets, the offtaker is not determined to control any significant residual interest in the property at the end of the concession term through ownership, beneficial entitlement or otherwise. The classification of the PWPA as an operating lease is based on the judgement applied by management which considers that the Group retains the principal risks and rewards of ownership of the plants, based on management’s estimate of the useful lives and residual values of the assets. An estimate of the useful lives of the asset and residual values is made and reviewed annually. The effects of changes in useful lives are recognised prospectively, over the remaining lives of the assets.

Impairment of non-financial assets – Indicators of impairmentManagement determines at each reporting date whether there are any indicators of impairment relating to the Group’s property, plant and equipment, intangible assets including exploration and evaluation assets, or goodwill. A broad range of internal and external factors is considered as part of the indicator review process.

Acquisition accountingWhen the Group makes an acquisition, judgement is required to determine whether the transaction or other event constitutes a business or represents only an asset or group of assets that do not constitute a business. The conclusion whether an acquired set of assets and activities is a business or not can lead to significantly different accounting results.

Estimates and assumptionsThe key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Acquisitions of business and associatesAccounting for the acquisition of a business or an associate requires an estimate of fair value to be made for most assets and liabilities of the acquired business. Determining the fair value of assets acquired and liabilities assumed requires judgement by management and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, the useful lives of licenses and other assets, and market multiples. The Group’s management uses all available information to make these fair value determinations. The Group has, if necessary, up to one year after the acquisition closing date to complete these fair value determinations and finalise the acquisition accounting.

Reserves base – oil and gas assets Oil and gas development and production properties are depreciated on a unit of production basis at a rate calculated by reference to proved and probable reserves, incorporating the estimated future cost of developing and extracting those reserves. Proved and probable oil and gas reserves are determined using estimates of oil in place, recovery factors and future oil prices. Future development costs are estimated using assumptions as to the number of wells required to produce the commercial reserves, the cost of such wells and associated production facilities, and other capital costs. The volume of estimated oil and gas reserves is also a key determinant in assessing whether the carrying value of anyof the Group’s development and production assets has been impaired.

Impairment of accounts receivableAn estimate of the collectible amount of accounts receivable is made when



collection of the full amount is no longer probable. Any difference between the amounts actually collected in future periods and the amounts expected to be recovered will be recognised in the consolidated income statement.

Impairment of inventoriesInventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed and a provision applied according to the inventory type.

Fair value of financial instrumentsWhere the fair value of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived based on quoted prices from active markets, their fair value is determined using valuation techniques including discounted cash flows models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgements include consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Contingent consideration resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor.

Impairment testing of non-financial assets The Group’s impairment testing for non-financial assets is based on calculating the recoverable amount of each cash generating unit or group of cash generating units being tested. Recoverable amount is the higher of value in use and fair value less costs to sell. Value in use for relevant cash generating units is derived from projected cash flows as approved by management and do not include restructuring activities

that the Group is not yet committed to or significant future investments that will enhance the asset base of the cash generating unit being tested. Fair value less cost to sell for relevant cash generating units is generally derived from discounted cash flow models using market based inputs and assumptions. The recoverable amount is most sensitive to price assumptions, foreign exchange rate assumptions and discount rates used in the cash flow models. The key assumptions used to determine the recoverable amount are further explained in notes 7 and 16 to the consolidated financial statements, which relate to impairment charges and impairment testing.

Estimation of oil and gas reservesOil and gas reserves and resources used for accounting purposes are estimated using internationally accepted methods and standards. The Group’s annual oil and gas reserves and resources review process includes an external audit process conducted by appropriately qualified parties. All reserve estimates are subject to revision, either upward or downward, based on new information, such as from development drilling and production activities or from changes in economic factors, including product prices, contract terms or development plans. In general, changes in the technical maturity of hydrocarbon reserves resulting from new information becoming available from development and production activities have tended to be the most significant cause of annual revisions. Changes in oil and gas reserves are an important indication of impairment or reversal of impairment and may result in subsequent impairment charges or reversals as well as affecting the unit-of-production depreciation charge in the consolidated income statement.

Provision for decommissioningDecommissioning costs will be incurred by the Group at the end of the operating life of certain of the Group’s facilities and properties. The ultimate decommissioning costs or asset retirement obligations are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques, or experience at production sites. The expected timing of expenditure can also change, for example in response to changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the provisions

established which would affect future financial results.

Income taxesThe Group recognises net future tax benefits to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant assumptions related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could change. Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods.

ContingenciesBy their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events.

2.5 Summary of significant accounting policiesBusiness combinations and goodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditionsas at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

45



2.5 Summary of significant accounting policiesContinuedIf the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through the consolidated income statement.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of the net assets acquired over the aggregate consideration transferred, the difference is recognised as a gain in the consolidated income statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units or group of cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit or group of cash generating units and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit or group of cash generating units retained, except when the Group determines that some other method better reflects the goodwill associated with the operation disposed of.

Fair value measurementThe Group measures financial instruments, such as, derivatives, and non-financial assets, at fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Current versus non-current classificationThe Group presents assets and liabilities in the statement of financial position based on current and non-current classification. An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within 12 months after the reporting period, or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

All other assets are classified as non-current. A liability is current when:

• It is expected to be settled in the normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within 12 months after the reporting period, or

• There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period.

The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.



Revenue recognitionRevenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured regardless of when payment is made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding sales taxes, royalties, and other similar levies as applicable.

Oil and gasRevenue from the sale of oil and gas is recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the customer. This generally occurs when the product is physically transferred into a delivery mechanism such as a vessel or a pipeline.

Lifting or offtake arrangements for oil and gas produced by certain of the Group’s jointly owned assets are such that each participant may not receive and sell its precise share of the overall production in each period. The resulting imbalance between cumulative production entitlement and cumulative sales attributable to each participant at a reporting date represents ‘underlift’ or ‘overlift’. Underlift and overlift are valued at market value and included within current assets and current liabilities respectively. Movements during an accounting period are adjusted through cost of sales such that gross profit is recognised on an entitlements basis.

Gas storageThe income from gas storage is recognised when the service is provided and accepted by customers.

Power and water and fuel revenueThe revenue recognition of the Group’s power and water business is as follows:(i) Where the Group determines that the

PWPA/PPA meets the financial asset model requirements for service concession arrangements, consideration receivable is allocated by reference to the relative fair values of the services delivered. Construction revenue is recognised commensurate with completion of construction when the outcome of the contract can be estimated reliably by reference to the stage of completion, operating revenue is recognised as the service is provided and finance revenue is recognised using the effective interest rate method on the financial asset.

(ii) Where the Group determines that the PWPA/PPA contains an operating lease, capacity payments are recognised as operating lease rental revenue on a systematic basis to the extent that capacity has been made available to the offtaker during the year. Those payments, which are not included as capacity payments (e.g. fuel revenue), are recognised as revenue in accordance with the contractual terms of the PWPA/PPA.

(iii) Energy and water payments are recognised as revenue when the contracted power and water is delivered to the offtaker.

(iv) Fuel revenue represents reimbursements from the offtakers in the power and water subsidiaries at market prices for fuel consumed in power generation in accordance with the terms of the power and water purchase agreements and the power purchase agreements. Fuel revenue is recognised as and when fuel is consumed in the production of power and water.

Liquidated damagesLiquidated damages in respect of loss of revenue due to late commissioning are included in revenue net of liquidated damages payable to the offtaker when the right to receive the liquidated damages is established.

Interest incomeInterest income is recognised as the interest accrues using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

TaxesCurrent income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date, in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the consolidated income statement.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income taxDeferred income tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred income tax liabilities are recognised for all taxable temporary differences, except:

• when the deferred income tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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2.5 Summary of significant accounting policies ContinuedTaxes continuedDeferred income tax continued The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred income tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underling transaction either in other comprehensive income or directly in equity.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Foreign currency translationFunctional currency is the currency of the primary economic environment in which an entity operates. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and has elected to recycle the gain or loss that arises from using this method.

i) Transactions and balancesTransactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.

All differences are taken to the consolidated income statement with the

exception of all monetary items that provide an effective hedge of a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates approximating as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates approximating at the date when the fair value was determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

ii) Group companiesOn consolidation, the assets and liabilities of foreign operations are translated into AED at the rate of exchange prevailing at the reporting date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the consolidated income statement.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange on the reporting rate.

Investments in associates and joint venturesAn associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture

is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or joint venture, any excess of the cost over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in the consolidated income statement in the period in which the investment is acquired. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. The consolidated income statement reflects the Group’s share of the results of the operations of the associate or joint venture. When the Group’s share of losses of an associate or joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Where there has been a change recognised directly in other comprehensive income or equity of



the associate or joint venture, the Group recognises its share of any changes and discloses this, when applicable, in the consolidated statement of comprehensive income or the consolidated statement of changes in equity, as appropriate. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate or a joint venture is included in the consolidated income statement. This is the profit attributable to equity holders of the associate or joint venture and therefore is the profit after tax and non-controlling interests of the joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. Adjustments are made where necessary to bring the accounting policies into line with those of the Group. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate or joint venture is impaired. If this is the case the Group calculates the amount of the impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value then recognises the loss in the consolidated income statement.

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained asset is a financial asset, the Group measures and recognises the retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an associate. There is no remeasurement to fair value upon such changes in ownership interests.

Interests in joint operationsA joint operation is a joint arrangement whereby parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to

the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation:

• Its assets, including its share of any assets held jointly.

• Its liabilities, including its share of any liabilities incurred jointly.

• Its revenue from the sale of its share of the output arising from the joint operation.

• Its share of the revenue from the sale of the output by the joint operation.

• Its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

Oil and gas joint venturesCertain of the Group’s activities in the oil and gas segment are conducted through joint operations where the venturers have a direct ownership interest in and jointly control the underlying assets of the venture. The Group accounts for its share of the jointly controlled assets, any liabilities it has incurred, its share of any liabilities jointly incurred with other ventures, income from the sale or use of its share of the joint venture’s output, together with its share of the expenses incurred by the joint venture, and any expenses it incurs in relation to its interest in the joint venture.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date. The arrangement is assessed for whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Group as a lesseeFinance leases, which transfer to the Group substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of

the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in the consolidated income statement. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an expense in the consolidated income statement on a straight line basis over the lease term.

Group as a lessor – Operating leasesLeases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Group as a lessor – Finance leasesLeases where the Group transfers substantially all the risks and benefits of ownership of the asset are classified as financial leases. The amounts due from the lessee are recorded in the statement of financial position as financial assets and are carried at the amount of the net investment in the lease after making provision for bad and doubtful debts.

Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the consolidated income statement in the year in which the expenditure is incurred.

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2.5 Summary of significant accounting policies ContinuedIntangible assets continuedThe useful lives of intangible assets are assessed to be either finite or indefinite. Amortisation for intangible assets with finite lives is calculated on a straight-line basis as follows: Tolling agreement 14 years Connection rights 34 - 40 years Computer software 3 yearsThe amortisation period and the amortisation method for intangible assets with finite useful lives are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the consolidated income statement in the expense category consistent with the function of the intangible asset. Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

Accounting policies relating to intangible assets arising from oil and gas exploration and evaluation expenditure are explained below under oil and natural gas exploration, evaluation and development expenditure.

Oil and natural gas exploration, evaluation and development expenditureExploration & evaluation costs – capitalisationPre-license costs and geological and geophysical exploration costs incurred prior to obtaining the rights to explore are recognised in the consolidated income statement when incurred. Exploration licences are recognised as an exploration and evaluation (“E&E”) asset. The cost of that licence includes the directly attributable costs of its acquisition. Examples of such costs may include non-refundable taxes and professional and legal costs incurred in obtaining the licence. Costs incurred after the rights to explore have been obtained, such as geological and geophysical costs, drilling costs, appraisal and development study costs and other directly attributable costs of exploration and evaluation activity, including technical and administrative costs for each exploration asset, are capitalised as intangible E&E assets. E&E costs are not amortised prior to the conclusion of appraisal activities.

At completion of appraisal activities if technical feasibility is demonstrated and commercial reserves are discovered then, following development sanction, the carrying value of the relevant E&E asset is reclassified as a development and production (“D&P”) asset. This category reclassification is only performed after the carrying value of the relevant E&E asset has been assessed for impairment, and where appropriate, its carrying value adjusted. If commercial reserves are not discovered at the completion of appraisal activity of each asset and it is not expected to derive any future economic benefits, the E&E asset is written off to the consolidated income statement.

Development costs Expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, including unsuccessful development or delineation wells, is capitalised within oil and gas properties.

Property, plant and equipmentProperty, plant and equipment - generalProperty, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. When significant parts of property, plant

and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. Day to day servicing and maintenance costs are recognised in the consolidated income statement as incurred. The present value of the expected cost for the decommissioning obligation of an asset at the end of its useful life is included in the cost of the respective asset if the recognition criteria for a provision are met.

Depreciation is calculated on a straight-line basis over the estimated useful lives of assets (except for oil and gas properties) as follows: Building, equipment, plant and machinery 20 - 40 yearsThe assets’ residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each reporting date.

The cost of spare parts held as essential for the continuity of operations and which are designated as strategic spares are depreciated on a straight-line basis over their estimated operating life. Spare parts used for normal repairs and maintenance are expensed when issued.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year the asset is derecognised.

Property, plant and equipment – oil and gas propertiesOil and gas properties in the development and production phase (“D&P” assets) and other related assets are stated at cost, less accumulated depreciation and accumulated impairment losses (net of reversal of previously recognised impairment losses, if any). The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation and the initial estimate of the decommissioning obligation. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.



Oil and gas properties are depreciated on a unit-of-production basis over the proved and probable (“2P”) reserves of the field concerned. The unit-of-production rate for the amortisation of field development costs takes into account expenditures incurred to date, together with estimated future development expenditure. Depreciation on oil and gas properties does not commence until the commencement of production from the property.

Property, plant and equipment – major maintenance and repairs Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets, inspection costs and overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off is replaced and it is probable that future economic benefits associated with the item will flow to the Group, the expenditure is capitalised. Where an asset or part of an asset was not separately considered as a component, the replacement value is used to estimate the carrying amount of the replaced asset (or asset part) which is immediately written off. Inspection costs associated with major maintenance programs are capitalised when the recognition criteria are met and amortised over the period to the next inspection. Day to day servicing and maintenance costs are expensed as incurred.

Property, plant and equipment – capital work in progressCapital work in progress is included in property, plant and machinery at cost on the basis of the percentage completed at the reporting date. The capital work in progress is transferred to the appropriate asset category and depreciated in accordance with the above policies when construction of the asset is completed and commissioned.

Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is recognised as a reduction to the carrying amount of the asset.

Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Initial spares feeThe fee paid for initial spares to be provided under a long-term maintenance contract is capitalised and amortised over the equivalent operating hours of the related power generating equipment.

Non-current assets and disposal groups held for saleThe Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through sale rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than continuing use.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the sale will be withdrawn. Management must be committed to the sale expected within one year from the date of classification. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.

Impairment of non-financial assetsThe Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use. Recoverable amount 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. When the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent appropriate market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses of continuing operations are recognised in the consolidated income statement in those expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated income statement.

The following criteria are also applied in assessing impairment of specific assets:

GoodwillGoodwill is tested for impairment on an annual basis at the reporting date and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the group of cash generating units, to which the goodwill is allocated. When the recoverable amount of the group of cash-generating units is less than their carrying amount an impairment

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2.5 Summary of significant accounting policies ContinuedImpairment of non-financial assets continuedloss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Where applicable, for the purposes of testing goodwill for impairment, any of the related deferred tax liabilities recognised on acquisition that, led to the creation of goodwill, and remain at the reporting date as estimated by the management are treated as part of the relevant group of cash generating units.

Exploration & evaluation (E&E) costsAn impairment review is performed if and when facts and circumstances indicate that the carrying amount of an E&E asset may exceed its recoverable amount. For the purpose of E&E asset impairment testing, cash-generating units are grouped at the operating segment level. An impairment test performed in the E&E phase therefore involves grouping all E&E assets within the relevant segment with the development & production (D&P) assets belonging to the same segment. The combined segment carrying amount is compared to the combined segment recoverable amount and any resulting impairment loss identified within the E&E asset is written off to the consolidated income statement. The recoverable amount of the segment is determined as the higher of its fair value less costs to sell and its value in use.

InventoriesInventories of fuel for the purpose of powering electricity generation facilities are valued at the lower of cost, determined on the basis of weighted average cost, and net realisable value. Costs are those expenses incurred in bringing each item to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Inventories of oil and oil products, which represent production from oil and gas facilities of the Group which are tanked at storage facilities awaiting sale, are valued at market value.

Service concessionsThe Group accounts for service concession arrangements under IFRIC 12 when the following conditions are met:

• the grantor (usually a government entity) controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and

• the grantor (usually a government entity) controls – through ownership, beneficial entitlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the arrangement.

In view of the above, concession infrastructure that does not meet the requirements of IFRIC 12 is presented as property, plant and equipment. Under IFRIC 12, the operator’s rights over the plant operated under concession arrangements are accounted for based on the party primarily responsible for payment:

• the ‘intangible asset model’ is applied when users have primary responsibility to pay for the concession services; and

• the ‘financial asset model’ is applied when the grantor has the primary responsibility to pay the operator for the concession services.

Where the grantor guarantees the amounts that will be paid over the term of the contract (e.g. via a guaranteed internal rate of return), the financial asset model is used to account for the concession infrastructure, since the grantor is primarily responsible for payment. The financial asset model is used to account for Build, Operate and Transfer (BOT) contracts entered into with the grantor. The Group recognises financial assets from service concession arrangements in the consolidated statement of financial position as operating financial assets. Pursuant to these principles:

• infrastructure to which the operator is given access by the grantor of the concession at no consideration is not recognised in the consolidated statement of financial position;

• start-up capital expenditure is recognised as follows:• under the intangible asset model, the

fair value of construction and other work on the infrastructure represents the cost of intangible asset and should be recognised when the infrastructure is built provided that this work is expected to generate future economic benefits,

• under the financial asset model, the amount receivable from the grantor is recognised at the time the infrastructure is built, at the fair value of the construction and other work carried out,

• when the grantor has a payment obligation for only part of the investment, the cost is recognised in receivables for the amount guaranteed by the grantor, with the balance included in intangible assets.

Financial instrumentsFinancial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Financial assetsAll regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification of financial assetsDebt instruments that meet the following conditions are subsequently measured at



amortised cost less impairment loss (except for debt investments that are designated as at fair value through profit or loss on initial recognition):

• the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

• the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at fair value.

Amortised cost and effective interest methodThe effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments measured subsequently at amortised cost. Interest income is recognised in profit or loss in the consolidated income statement.

Financial assets at fair value through other comprehensive income (FVTOCI)On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading.A financial asset is held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and

• has evidence of a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

Investments in equity instruments at FVTOCI are initially measured at fair value

plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the cumulative changes in fair value relating to investment carried at FVOCI. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.

The Group has designated all investments in equity instruments that are not held for trading as at FVTOCI on initial application of IFRS 9.

Financial assets at fair value through profit or loss (FVTPL)Investments in equity instruments are classified as at FVTPL, unless the Group designates an investment that is not held for trading as at fair value through other comprehensive income (FVTOCI) on initial recognition (see above). Debt instruments that do not meet the amortised cost criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt instrument may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has not designated any debt instrument as at FVTPL.

Foreign exchange gains and lossesThe fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. The foreign exchange component forms part of its fair value gain or loss.Therefore:

• for financial assets that are classified as at FVTPL, the foreign exchange component is recognised in profit or loss; and

• for financial assets that designated as at FVTOCI, any foreign exchange component is recognised in other comprehensive income.

Impairment of financial assetsFinancial assets that are measured at amortised cost are assessed for impairment at the end of each reporting period. 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 assets, the estimated future cash flows of the asset have been affected.Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation; or

• the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

The amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows reflecting the amount of collateral and guarantee, discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

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2.5 Summary of significant accounting policies ContinuedFinancial assets continuedDerecognition of financial assetsThe Group 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 to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

On derecognition of a financial asset that is classified as FVTOCI, the cumulative gain or loss previously accumulated in the cumulative changes in fair value relating to investment carried at FVOCI is not reclassified to profit or loss, but is reclassified to retained earnings.

Financial liabilities and equity instrumentsClassification as debt or equityDebt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Financial liabilitiesAll financial liabilities are subsequently

measured at amortised cost using the effective interest method or at FVTPL.However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Group, and commitments issued by the Group to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.

Financial liabilities at FVTPLFinancial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.A financial liability is classified as held for trading if:

• it has been acquired principally for the purpose of repurchasing it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and the entire combined contract is designated as at FVTPL in accordance with IFRS 9.

Financial liabilities at FVTPL are stated at fair value. Any gains or losses arising on remeasurement of held-for-trading financial liabilities are recognised in profit or loss. Such gains or losses that are recognised in profit or loss incorporate any interest paid on the financial liabilities and

are included in the ‘other gains and losses’ line item in the consolidated statement of comprehensive income.

However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining amount of change in the fair value of liability is recognised in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss.

Financial liabilities at FVTPLGains or losses on financial guarantee contracts and loan commitments issued by the Group that are designated by the Group as at fair value through profit or loss are recognised in profit or loss. Fair value is determined in the manner described in note 40.

Financial liabilities subsequently measured at amortised costFinancial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the finance costs in the consolidated income statement.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Foreign exchange gains and lossesFor financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and



losses are determined based on the amortised cost of the instruments and are recognised in the consolidated statement of comprehensive income.

The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss.

Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Derivative financial instruments and hedge accountingThe Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial instruments are disclosed in note 40.

Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

Embedded derivativesDerivatives embedded in non-derivative host contracts that are not financial assets within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

Hedge accountingThe Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign

operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Note 40 sets out details of the fair values of the derivative instruments used for hedging purposes.

Fair value hedgesChanges in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognised in the line of the consolidated statement of comprehensive income relating to the hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.

Cash flow hedgesThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of changes in fair values of derivative instruments in cash flow hedges. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in changes in fair values of derivatives and fair value hedges line item.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the consolidated statement of comprehensive income as the recognised hedged item. However, when the hedged forecast transaction

results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.

Hedges of net investments in foreign operationsHedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated under the heading of foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item. Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal of the foreign operation.

Normal purchase or sale exemptionContracts that are entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Group’s expected purchase, sale or usage requirements fall within the exemption from IAS 32 and IFRS 9, which is known as the ‘normal purchase or sale exemption’. These contracts are accounted for as executory contracts. The Group recognises such contracts in its statement of financial position only when one of the parties meets its obligation under the contract to deliver either cash or a non-financial asset.

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2.5 Summary of significant accounting policies ContinuedTreasury sharesOwn equity instruments which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in the consolidated income statement on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in other reserves.

Pensions and other post-employment benefitsEmployees’ end of service benefitsThe Group provides end of service benefits to certain employees. The entitlement to these benefits is usually based upon the employees’ length of service and the completion of a minimum service period and year, the expected costs of these benefits are accrued over the years of employment. With respect to its UAE national employees, the Group makes contributions to the Abu Dhabi Retirement Pensions and Benefits Fund calculated as a percentage of the employees’ salaries. Where the Group’s obligations are limited to these contributions made to pension and benefit funds, these contributions are expensed on a monthly basis and paid when due.

Defined benefit pension planThe cost of defined benefit pension plans and other post employment medical benefits and the present value of the pension obligation are determined using actuarial valuations. The cost of providing benefits under defined benefit plans is determined using the projected unit credit method. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

• The date of the plan amendment or curtailment; and

• The date that the Group recognises related restructuring costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation in consolidated statement of profit or loss by function:

• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements;

• Net interest expense or income.

Cash and short-term depositsCash and short-term deposits in the consolidated statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

ProvisionsGeneralProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects the time value of money and where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Asset retirement obligations/ decommissioning liabilityCertain subsidiaries have legal obligations in respect of site restoration and abandonment of their power generation and water desalination assets and oil and gas properties at the end of their useful lives (decommissioning costs). The Group records a provision for the site restoration and abandonment based upon estimated costs at the end of their useful lives. Accordingly, a corresponding asset is recognised in property, plant and equipment. Decommissioning costs are recorded at the present value of expected costs to settle the obligations using estimated cash flows and are recognised as part of the cost of each specific asset. The cash flows are discounted at a rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognised in the consolidated income statement as a finance cost. The estimated future costs of the asset retirement obligation are reviewed annually and adjusted as appropriate. Changes to provisions based on revised costs estimates or discount rate applied charges are added to or deducted from the cost of the relevant asset.

Production bonusesThe Group’s production sharing contract contains a legal obligation for production bonuses to be paid to the Kurdistan Regional Government when certain production targets are achieved. The Group records a provision for these bonuses when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. This is assessed based on the Group’s share of proved and probable reserves under the production sharing contract.

ContingenciesFrom time to time the Group receives claims in the ordinary course of business. Liabilities and contingencies in connection with these matters are periodically assessed based upon the latest information available, usually with the assistance of lawyers and other specialists. A liability is accrued only if an adverse outcome is more likely than not and the amount of the loss can be reasonably estimated. If one of these conditions is not met, the claim is disclosed as a contingent liability, if material. The actual outcome of a claim may differ from the estimated liability and consequently may affect the financial performance and position of the Group.



2.6 Standards issued but not yet effectiveStandards, amendments to standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

IFRS 14 Regulatory Deferral AccountsIFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate-regulation and the effects of that rate-regulation on its financial statements. IFRS 14 is effective for annual periods beginning on or after 1 January 2016. Since the Group is an existing IFRS preparer, this standard would not apply.

IFRS 15: Revenue from Contracts with CustomersIFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 with early adoption permitted.

Amendments to IAS 19 Defined Benefit Plans: Employee ContributionsIAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined

benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. It is not expected that this amendment would have a material impact to the Group.

Amendments to IFRS 11: Joint Arrangements (Amendment)The amendment to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and AmortisationThe amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible

assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted.

Amendments to IAS 16 and IAS 41 Agriculture: Bearer PlantsThe amendments changes the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group as the Group does not have any bearer plants.

Amendments to IAS 27: Equity Method in Separate Financial Statements The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments will not have any impact on the Group’s consolidated financial statements.

The Company intends to adopt these new standards and amendments to existing standards, when they become effective.

The Company however, expects no material impact from the adoption of the above new and amended standards on its financial position or performance.

57



3 Operating segmental informationDuring the year, a review of the Group’s operating segments identified that the operating structure disclosed in 2013 was no longer appropriate. The resulting changes to the Group’s management reporting in 2014 have increased the number of operating segments. For management reporting purposes, the Group is organised into business units based on their geography, products and services, and has six reportable operating segments as follows:

• Power and Water Segment – UAE

• Power Segment – Others

• Oil and Gas Segment – North America

• Oil and Gas Segment – United Kingdom

• Oil and Gas Segment – Netherlands

• Oil and Gas Segment – Atrush

Power and Water Segment – UAEThis segment is engaged in generation of electricity and production of desalinated water for supply in UAE.

Power Segment – OthersThis segment is engaged in generation of electricity in Morocco, India, Ghana, Saudi Arabia and North America.

Oil and Gas Segment – North AmericaThis segment comprises of the TAQA North business unit and is engaged in Upstream and Midstream oil and gas activities in Canada and the United States.

Oil and Gas Segment – United KingdomThis segment comprises of the TAQA Bratani business unit and is engaged primarily in Upstream oil and gas activities in the United Kingdom.

Oil and Gas Segment – NetherlandsThis segment comprises of the TAQA Energy business unit and is engaged primarily in Upstream and Midstream oil and gas activities in the Netherlands.

Oil and Gas Segment – AtrushThis segment comprises of the TAQA Atrush business unit and is engaged primarily in Upstream oil and gas activities in Kurdistan, Iraq.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss. Group financing (including finance costs except for the subsidiaries involved in power and water generation with project financing arrangements and interest income) is managed on a group basis and is not allocated to operating segments.

Investment in certain associates with activities other than power and water generation and oil and gas and available for sale investments are managed on a group basis and are therefore not allocated to operating segments.

Interest bearing loans and borrowings and Islamic loans except for the subsidiaries involved in power and water generation with project financing arrangements and bank overdrafts are managed on a Group basis and are not allocated to operating segments.

The following table presents revenue and profit information for the Group’s operating segments:

Power and water

generation –UAE

AED million

Powergeneration –

othersAED million

Oil andgas –North

AmericaAED million

Oil andgas –

UKAED million

Oil andgas

NetherlandsAED million

Oil andgas–

AtrushAED million

Adjustments,eliminations

andunallocatedAED million

ConsolidatedAED million

Year ended 31 December 2014:Revenue from external customers 7,042 6,363 4,304 7,933 1,675 8 – 27,325Operating expenses (1,525) (4,595) (1,629) (3,153) (1,003) – – (11,905)Administrative and other expenses (131) (192) (294) (61) (47) (47) (326) (1,098)Share of results of associates – 9 – – – – 114 123Share of results of a joint venture – – – – – – 31 31

Earnings before interest, tax, depreciation and amortisation (EBITDA) 5,386 1,585 2,381 4,719 625 (39) (181) 14,476

Provision for impairment – – (1,787) (1,919) (131) – – (3,837)Dry hole expenses – – (59) (581) – – – (640)Depreciation, depletion and amortisation (1,759) (68) (2,094) (2,702) (303) – (16) (6,942)

Earnings before interest and tax (EBIT) 3,627 1,517 (1,559) (483) 191 (39) (197) 3,057

Finance costs (2,210) (424) (139) (467) (16) – (1,593) (4,849)Changes in fair value of derivatives and fair value hedges 42 (309) – 24 – – – (243)Net foreign exchange gains (losses) 4 (289) 43 25 4 (1) 356 142Gain from sale of land and oil & gas assets – – 167 – – – – 167Interest income – – – – – – 17 17Other gains and losses 3 (25) – 13 5 – 26 22Income tax (expense) credit – (252) (279) (277) (84) – 290 (602)

Profit (loss) for the year 1,466 218 (1,767) (1,165) 100 (40) (1,101) (2,289)



3 Operating segmental informationContinued

Power and water

generation –UAE

AED million

Powergeneration –

othersAED million

Oil andgas –North

AmericaAED million

Oil andgas –

UKAED million

Oil andgas –

NetherlandsAED million

Oil andgas –

AtrushAED million

Adjustmentseliminations

andunallocatedAED million

ConsolidatedAED million

Year ended 31 December 2013:Revenue from external customers 7,184 6,383 3,913 6,782 1,488 4 3 25,757Operating expenses (1,445) (4,903) (1,605) (2,595) (796) – (2) (11,346)Administrative and other expenses (129) (151) (392) (98) (14) (34) (381) (1,199)Share of results of associates – 8 – – – – 120 128Share of results of joint venture – – – – 79 – 26 105

Earnings before interest, tax, depreciation and amortisation (EBITDA) 5,610 1,337 1,916 4,089 757 (30) (234) 13,445

Provision for impairment – – (3,331) 84 – – – (3,247)Dry hole expenses – – – (336) (12) – – (348)Depreciation, depletion and amortisation (1,725) (69) (2,178) (1,970) (263) – (24) (6,229)

Earnings before interest and tax (EBIT) 3,885 1,268 (3,593) 1,867 482 (30) (258) 3,621

Finance costs (2,249) (380) (147) (368) (14) – (1,929) (5,087)Changes in fair value of derivatives and fair

value hedges 67 (20) (4) (3) – – 1 41Net foreign exchange gains (losses) 2 34 13 15 – – (250) (186)Gain on disposal of joint venture – – – – 54 – – 54Bargain purchase gain – – – 49 – – – 49Interest income – 61 – 23 – – 16 100Gain on sale of land and oil and gas assets – – 101 – – – – 101Other gains and losses 2 15 – – – – 103 120Other investment income – – – – 60 – 20 80Income tax (expense) credit – (265) 668 (1,131) (162) – 229 (661)

Profit (loss) for the year 1,707 713 (2,962) 452 420 (30) (2,068) (1,768)

At 31 December 2014Investment in associates – 82 – – – – 644 726Investment in joint venture – – – – – – 151 151Advance and loans to associates – 8 – – – – 865 873Operating financial assets – 10,375 – – – – – 10,375Other assets 49,990 5,580 23,966 14,197 5,721 3,080 379 102,913

Segment assets 49,990 16,045 23,966 14,197 5,721 3,080 2,039 115,038

Liabilities 41,692 9,614 6,696 12,244 1,464 241 34,303 106,254

At 31 December 2013Investment in associates – 71 – – – – 521 592Investment in joint venture – – – – – – 144 144Advance and loans to associates – 13 – – – – 968 981Operating financial assets – 10,319 – – – – – 10,319Other assets 51,170 5,972 26,612 16,899 5,642 2,586 1,008 109,889

Segment assets 51,170 16,375 26,612 16,899 5,642 2,586 2,641 121,925

Liabilities 43,416 9,064 7,260 12,305 2,019 167 35,380 109,611

Other disclosures Year ended December 2014Additions to property, plant and equipment 790 49 1,476 2,769 894 – 18 5,996Construction costs relating to operating

financial assets – 404 – – – – – 404Additions to intangible assets – – 56 65 95 371 10 597Provision for impairment – – (1,787) (1,919) (131) – – (3,837)Dry hole expenses – – – (640) – – – (640)

Year ended December 2013Additions to property, plant and equipment 561 31 1,694 2,903 1,173 – 38 6,400Construction costs relating to operating

financial assets – 1,353 – – – – – 1,353Additions to intangible assets – – 47 402 40 207 37 733Provision for impairment – – (3,331) 84 – – – (3,247)Dry hole expenses – – – (336) (12) – – (348)

59



3 Operating segmental informationContinued

• Inter-segment transactions are undertaken on an arm’s-length basis in a manner similar to transactions with third parties.

• Inter-segment revenues are eliminated on consolidation.

• Construction costs represent expenditure incurred on Jorf 5&6 and Takoradi expansion in Morocco and Ghana respectively (note 5).

Geographical informationThe following tables present revenue and certain asset information relating to the Group based on the geographical location of the subsidiaries:

UAEAED million

North AmericaAED million

United Kingdom

AED millionNetherlandsAED million

AfricaAED million

OthersAED million

TotalAED million

RevenueYear ended 31 December 2014 7,042 5,540 7,933 1,675 4,713 422 27,325

Year ended 31 December 2013: 7,184 4,761 6,782 1,488 5,102 440 25,757

Non-current assetsAt 31 December 2014: 44,475 23,969 13,108 5,338 9,859 3,990 100,739

At 31 December 2013: 45,713 25,581 15,499 5,473 9,744 4,375 106,385

Non-current assets for this purpose consist of operating financial assets, property, plant and equipment, intangible assets and other assets.

Other informationThe following table provides information relating to the Group’s major customers which contribute more than 10% towards the Group’s revenue.

Power and water AED million

Oil and GasAED million

TotalAED million

Year ended 31 December 2014Customer 1 7,042 – 7,042Customer 2 3,652 – 3,652Customer 3 – 6,196 6,196

Total 10,694 6,196 16,890

Year ended 31 December 2013Customer 1 7,183 – 7,183Customer 2 3,235 – 3,235Customer 3 – 4,963 4,963

Total 10,418 4,963 15,381

4 Revenues4.1 Revenue from oil and gas

2014AED million

2013AED million

Gross oil and gas revenue 12,847 11,438Less: royalties (781) (651)

12,066 10,787



4.2 Revenue from electricity and water2014

AED million2013

AED million

Operating lease revenue 5,769 5,805Revenue from operating financial assets (note 13) 1,954 2,649Sale of electricity 172 205Energy payments and other related revenue 1,477 1,356

9,372 10,015

Revenue from operating financial assets includes in revenue from to JLEC 5&6 of AED 300 million (2013: AED 748 million) and from the TICO power plant expansion of AED 248 million (2013: AED 651 million).

4.3 Fuel revenueFuel revenue represents reimbursements from the offtakers of the power and water subsidiaries at market prices for fuel consumed in power generation in accordance with the terms of the related power and water purchase agreements and power purchase agreements. Fuel revenue is further analysed as follows:

2014AED million

2013AED million

Backup fuel in domestic subsidiaries reimbursed by ADWEC (note 38) 28 17Reimbursement of coal and other fuel costs in foreign power subsidiaries 3,761 3,192

3,789 3,209

4.4 Other operating revenue2014

AED million2013

AED million

Net processing income 451 493Tariff income 95 152Gas trading 891 556Refinancing and lease extension fee – 177Others 349 155

1,786 1,533

5 Operating expenses2014

AED million2013

AED million

Staff costs 382 358Repairs, maintenance and consumables used 3,829 3,490Fuel expenses 3,599 3,169Construction costs 404 1,353Charges by operating and maintenance contractors 1,412 1,359Oil and gas operating costs 848 641Gas purchases for trading 749 543Transportation costs 163 214Gas storage expenses 228 57Exploration and evaluation assets written off (note 15) 84 45Others 207 117

11,905 11,346

Construction costs include costs in relation to Jorf 5&6 of AED 291 million (2013: AED 721 million) and the Takoradi power plant expansion of AED 113 million (2013: AED 632 million).

6 Depreciation, depletion and amortisation2014

AED million2013

AED million

Depreciation of property, plant and equipment and depletion of oil and gas assets (note 12) 6,824 6,091Amortisation of initial spares fees (note 20) 12 12Amortisation of intangible assets (note 15) 133 146Recovery of intangible asset amortisation (27) (20)

6,942 6,229

61


7 Provisions for impairment2014

AED million2013

AED million

Provision for impairment on property, plant and equipment (note (i)) 1,134 1,733Reversal of provision for impairment on property, plant and equipment (note (ii)) – (84)Impairment charge relating to goodwill (see note 16) 2,703 1,598

3,837 3,247

(i) Provision for impairment on property, plant and equipment2014:During the year ended 31 December 2014, a pre-tax impairment charge of AED 1,114 million (post tax: AED 555 million) was recognised in the consolidated income statement, representing the write down of certain oil and gas assets located in the UK North Sea to their recoverable amounts. These assets are included in the Oil and gas – UK segment.

In addition, a pre-tax impairment charge of AED 20 million (post tax: AED 9 million) was recognised in the consolidated income statement, representing the write down of certain oil and gas assets located in the Netherlands to their recoverable amounts. These assets are included in the Oil and gas – Netherlands segment.

The recoverable amounts were based on their fair value less costs of disposal (“FVLCD”). In determining FVLCD, appropriate discounted cash flow valuation models were used, incorporating market based assumptions.

The key assumptions for the FVLCD calculations are outlined in note 16 to the consolidated financial statements. In determining the FVLCD, the cash flows for the UK were discounted using a post-tax discount rate of 7.5% (2013: 7.5%); the cash flows for the Netherlands were discounted using a post-tax discount rate of 7.0% (2013: 7.0%).

The fair value measurement was categorised as a Level 3 fair value based on the inputs to the valuation models. The write-down resulted primarily from the recent significant decline in oil prices.

The recoverable amount of the Oil and gas – North America segment was determined using the Value in Use model. No impairment has been recognised. See note 16 for further details.

2013:During the year ended 31 December 2013, a pre-tax impairment charge of AED 1,733 million (post tax: AED 1,105 million) was recognised in the consolidated income statement representing the write down of certain oil and gas assets located in the US, East Central and North CGUs in North America to their recoverable amounts. These assets are included in the Oil and gas – North America segment. The recoverable amounts were based on their FVLCD. The carrying amount of the US CGU was determined to be higher than its recoverable amount of AED 353 million and a pre-tax impairment loss of AED 1,511 million was recognised. The carrying amount of the East Central CGU was determined to be higher than its recoverable amount of AED 1,424 million and a pre-tax impairment loss of AED 160 million was recognised. The carrying amount of the North CGU was determined to be higher than its recoverable amount of AED 3,968 million and a pre-tax impairment loss of AED 62 million was recognised. In determining FVLCD, an appropriate discounted cash flow valuation model was used, incorporating market based assumptions.

The key assumptions for the FVLCD calculations are outlined in note 16 to the consolidated financial statements. In determining the FVLCD for the cash generating units, the cash flows were discounted using a post-tax discount rate of 7.2%.

The fair value measurement was categorised as a Level 3 fair value based on the inputs to the valuation model. The write-down resulted primarily from a decline under a low gas price environment.

(ii) Reversal of provision for impairment on property, plant and equipmentThe reversal of impairment charges during the year ended 31 December 2013 relates to the write-back of prior period charges made in respect of oil and gas assets located within the UK. These assets are included in the Oil and gas – UK segment. The recoverable amounts were based on the FVLCD method and were determined at the cash-generating unit level. In determining FVLCD, an appropriate discounted cash flow valuation model was used, incorporating market-based assumptions. The key assumptions for the FVLCD calculations are outlined in note 16 to the financial statements. In determining the FVLCD for the cash generating unit, the cash flows were discounted using a post-tax discount rate of 7.5%. The fair value measurement was categorised as a Level 3 fair value based on the inputs to the valuation model.



8 Administrative and other expenses2014

AED million2013

AED million

Salaries and related expenses 603 722Professional fees and business development expenses (note (i)) 178 158Others 317 319

1,098 1,199

(i) Professional fees and business development expenses include fees paid to the statutory auditor for audit and other services to the Group of AED 14.8 million (2013: AED 14.1 million).

2014AED ‘000

2013AED ‘000

Audit of the group financial statements 600 600Audit and review related assurance services of subsidiaries 9,478 10,754Tax advisory services 3,066 2,430All other services 1,621 325

14,765 14,109

9 Finance costs and interest income9.1 Finance costs

2014AED million

2013AED million

Finance costs relating to bonds and notes 1,831 1,964Finance costs relating to interest bearing loans and borrowings and Islamic loans 864 1,020Finance costs on loan from ADWEA (note 38) 21 21Notional interest expense on loan from ADWEA and ADPC (notes 33 & 38) 2 2Interest expense on interest rate swaps 1,449 1,505Asset retirement obligation accretion expense (note 32) 667 554Other accretion expense 15 21

4,849 5,087

9.2 Interest income2014

AED million2013

AED million

Interest income on loan to associate (note 38) 4 5Interest income on receivables – 82Interest income on short-term deposits 13 13

17 100

10 Income taxThe major components of income tax expense for the years ended 31 December 2014 and 2013 are:

2014AED million

2013AED million

Consolidated income statementCurrent income tax:Current income tax charge 1,915 899Adjustment in respect to income tax of previous years (948) (59)Deferred income tax:Relating to origination and reversal of temporary differences (365) (179)

Income tax expense reported in the consolidated income statement 602 661

Incorporated within the deferred income tax expense above are exchange differences on deferred foreign tax liabilities and assets which are recognised in the consolidated statement of comprehensive income and are classified within income tax as they are considered to be part of the tax expense of the Group. In 2014 these differences amounted to a deferred income tax benefit of AED 4 million (2013: AED 22 million).

63


10 Income taxContinuedThe reconciliation between tax expense and the product of accounting profit multiplied by the applicable statutory tax rates for the years ended 31 December 2014 and 2013 is as follows:

2014AED million

2013AED million

Loss before tax (1,687) (1,107)Non-taxable income (including income in non-taxable jurisdictions) 3,300 560

Total taxable profit (loss) 1,613 (547)

Applicable tax charge at statutory rates - weighted average of 4% (2013: 68%) 71 (372)Adjustment with respect to income tax of previous years (41) (59)Withholding taxes 107 112Tax incentives (94) (72)Special production taxes on upstream activities 43 594Others 516 458

Income tax expense reported in the consolidated income statement 602 661

Deferred taxDeferred income tax at 31 December relates to the following

Consolidated statementof financial position

Consolidatedincome statement

2014AED million

2013AED million

2014AED million

2013AED million

Deferred tax assets:Temporary difference on property, plant and equipment (182) 192 (374) 192Temporary difference arising on asset retirement obligations 14 14 1 14Tax losses 633 288 345 288Others 82 – 82 –

547 494 54 494

Deferred tax liabilities:Temporary difference on property, plant and equipment 9,971 10,819 (868) 1,363Temporary difference arising on asset retirement obligations (5,416) (4,976) (463) (463)Tax losses (344) (1,453) 1,253 (419)Others (568) (259) (234) (165)

3,643 4,131 (312) 316

Based on the latest available forecast of future profits, the Group has determined AED 843 million of tax losses (2013: AED 576 million) are unlikely to be utilised in the foreseeable future. Hence no deferred tax benefit has been recognised, though these losses remain available for offset against future taxable profits.

At 31 December 2014, there were no amounts unrecognised in respect of deferred tax liabilities for taxes that would be payable on the unremitted earnings of certain subsidiaries (2013: nil). The Group has determined that undistributed profits of certain subsidiaries will be distributed in the foreseeable future and has recognised the applicable tax liability.

11 Basic and diluted losses per shareBasic loss per share amounts are calculated by dividing loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted loss per share amounts are calculated by dividing the loss attributable to ordinary shareholders of the Parent by the weighted average number of ordinary shares outstanding during the year, adjusted for the effects of dilutive instruments.

The following reflects the loss and shares data used in the earnings per share computations:

2014 2013

Loss for the year attributable to owners of the parent (AED million) (3,010) (2,519)

Weighted average number of ordinary shares issued (million) 6,066 6,066

Basic loss per share (AED) (0.50) (0.42)

No figure for diluted loss per share has been presented as the Company has not issued any instruments which would have an impact on earnings per share when exercised. The weighted average number of shares take into account the treasury shares as at year end.



12 Property, plant and equipment

Capitalwork in

progress (note i)AED million

Building,equipment,

plant andmachinery

AED million

Oil andgas assets

AED million

Plantspares

AED millionTotal

AED million

2014Cost:At 1 January 2014 3,818 56,233 56,060 322 116,433Additions 1,170 569 4,244 13 5,996Disposals of assets (note ii) – (58) (180) – (238)Transfers (note 15) (190) 260 785 1 856Exchange adjustment (301) (517) (328) – (1,146)

At 31 December 2014 4,497 56,487 60,581 336 121,901

Depreciation and depletion:At 1 January 2014 – 12,325 19,163 87 31,575Charge for the year (note 6) – 1,953 4,863 8 6,824On sale of assets – (7) (67) – (74)Exchange adjustment – (432) (149) – (581)

At 31 December 2014 – 13,839 23,810 95 37,744

Impairment:At 1 January 2014 – – 3,204 – 3,204Impairment charge during the year (note 7) – – 1,134 – 1,134Exchange adjustment – – (5) – (5)

At 31 December 2014 – – 4,333 – 4,333

Net carrying amount:

At 31 December 2014 4,497 42,648 32,438 241 79,824

2013Cost:At 1 January 2013 2,536 55,433 49,146 419 107,534On business combination – – 4,480 – 4,480Additions 1,390 550 4,455 5 6,400Sale of assets (note ii) (11) (12) (157) (93) (273)Transfers (note 15) (88) 97 72 (9) 72Exchange adjustment (9) 165 (1,936) – (1,780)

At 31 December 2013 3,818 56,233 56,060 322 116,433

Depreciation and depletion:At 1 January 2013 – 10,301 15,645 93 26,039Charge for the year (note 6) – 1,881 4,193 17 6,091On sale of assets – (1) (54) (23) (78)Exchange adjustment – 144 (621) – (477)

At 31 December 2013 – 12,325 19,163 87 31,575

Impairment:At 1 January 2013 – – 1,633 – 1,633Impairment charge during the year (note 7) – – 1,733 – 1,733Impairment reversal during the year (note 7) – – (84) – (84)Exchange adjustment – – (78) – (78)

At 31 December 2013 – – 3,204 – 3,204

Net carrying amount:At 31 December 2013 3,818 43,908 33,693 235 81,654

Note (i) Capital work in progress additions include capitalised borrowing costs of AED 167 million (2013: AED 89 million).

Note (ii) During the year ended 31 December 2014, TAQA North sold various non-core oil and gas assets for proceeds of AED 298 million (2013: AED 317 million). The gain on sale of assets of AED 167 million (2013: AED 101 million) included goodwill written off of AED 14 million (2013: AED 21 million), AED 8 million of unevaluated properties and AED 4 million relating to asset retirement obligations (note 15).

Note (iii) Property, plant and equipment with a carrying amount of AED 43,546 million (2013: AED 44,185 million) is pledged as security for the related loans.

65


13 Operating financial assets2014

AED million2013

AED million

The movement in operating financial assets is as follows:At 1 January 10,319 8,180Transferred from receivables 57 339Recognised during the year (note 4.2) 1,954 2,649Consideration received during the year (1,491) (928)Exchange adjustment (464) 79

At 31 December 10,375 10,319

Analysed in the consolidated statement of financial position as follows:Non current portion 10,147 9,977Current portion 228 342

10,375 10,319

TAQA manages three concession contracts as defined by IFRIC 12, mainly covering electricity generation. The foreign subsidiaries, namely Jorf Lasfar Energy Company SCA (Jorf Lasfar), TAQA Neyveli Power Company Pvt Ltd (Neyveli) and Takoradi International Company (Takoradi), have entered into power purchase agreements (“PPAs”) with offtakers in the countries where they are operating. Under the PPAs the foreign subsidiaries undertake to make available, and the offtakers undertake to purchase, the available net capacity of the plants for a period of time in accordance with various agreed terms and conditions as specified in the PPAs as follows:Jorf Lasfar:The subsidiary has the right of possession for the site and the plant units for a period of 30 years ending in September 2027. After the 30-year period, the ownership of the site and the plants will be transferred to the offtaker.

During 2009, Office National de l’Electricité (“ONE”), Jorf Lasfar Energy Company (“JLEC”) and TAQA signed a strategic partnership agreement to extend the capacity of JLEC by two new units of an approximate gross capacity of 350 MW each. As per this agreement, JLEC or an affiliate will build, own, and operate the new units 5 and 6 under a 30-year power purchase agreement with ONE. The related engineering, procurement and construction contract committed the Group to spend approximately AED 3,805 million in the construction of the facilities. The facilities were completed in 2014 with a total construction cost of AED 3,802 million.

Neyveli:The subsidiary has a 30-year PPA with the offtaker ending in December 2032. On the expiry of the PPA, the offtaker has the option to acquire the plant at a price equal to 50% of the terminal value as defined in the PPA.

Takoradi:The subsidiary has a 25-year PPA with the offtaker ending in March 2024. On expiry date of the PPA, the plant is to be transferred to the offtaker at a nominal amount. During 2012, construction works began in relation to an expansion project at the Takoradi power plant. The expansion project will increase the existing 330 MW capacity to 660 MW. As a result of the expansion, the PPA term has been extended to 2039.

Operating financial assets with a carrying amount of AED 10,375 million (2013: AED 10,319 million) are pledged as security for the related borrowings in the subsidiaries.

14 Investments carried at FVOCI2014

AED million2013

AED million

The movement in the unquoted investment in managed fund (outside UAE) during the year is as follows:At 1 January 583 509Additions during the year – 12Return of capital (9) –Changes in fair value during the year (79) 62Disposal of equity investment (493) –

At 31 December 2 583

During the year ended 31 December 2014, the Group sold its equity investment in an infrastructure fund managed by a third party. The Group viewed the investment as non-core and given its geography did not fit the Group’s current investment strategy. The Group recognised a cumulative loss on disposal of AED 11 million as reflected in the consolidated statement of changes in equity. The fair value of the equity investment at the time of disposal amounted to AED 493 million.

There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements during either the year ended 31 December 2014 or the year ended 31 December 2013.

For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.



15 Intangible assetsExploration

andevaluation

assetsAED million

TollingagreementAED million

Connectionrights

AED millionGoodwill

AED million

Computer software

AED millionTotal

AED million

2014Cost:At 1 January 2014 4,172 836 1,388 9,727 203 16,326Additions 569 – – 28 597Sale of assets (8) – – (14) – (22)Transfers to oil and gas assets (note 12) (856) – – – – (856)Dry hole expenses written off (640) – – – – (640)Derecognised during the year (note 5) (84) – – – – (84)Exchange adjustment (6) – – (144) – (150)

At 31 December 2014 3,147 836 1,388 9,569 231 15,171

Amortisation:At 1 January 2014 – 304 304 – 132 740Amortisation for the year (note 6) – 61 38 – 34 133

At 31 December 2014 – 365 342 – 166 873

Impairment:At 1 January 2014 – – – 1,598 – 1,598Impairment charge during the year (note 7) – – – 2,703 – 2,703

At 31 December 2014 – – – 4,301 – 4,301

Net book value before fair value adjustment:

At 31 December 2014 3,147 471 1,046 5,268 65 9,997

Fair value adjustment on effective fair value hedges (note 40.2(v)) – 535 – – – 535

Net book value after fair value adjustment:At 31 December 2014 3,147 1,006 1,046 5,268 65 10,532

2013Cost:At 1 January 2013 4,048 836 1,388 9,983 173 16,428Additions 690 – – 12 31 733Sale of assets (6) – – (21) – (27)Goodwill arising on business combinations – – – 119 – 119Transfers to receivables (7) – – – – (7)Transfers to oil and gas assets (note 12) (72) – – – – (72)Dry hole expenses written off (348) – – – – (348)Derecognised during the year (note 5) (45) – – – – (45)Exchange adjustment (88) – – (366) (1) (455)

At 31 December 2013 4,172 836 1,388 9,727 203 16,326

Amortisation:At 1 January 2013 – 243 266 – 85 594Amortisation for the year (note 6) – 61 38 – 47 146

At 31 December 2013 – 304 304 – 132 740

Impairment:Impairment charge during the year (note 7) – – – 1,598 – 1,598

At 31 December 2013 – – – 1,598 – 1,598

Net book value before fair value adjustment:At 31 December 2013 4,172 532 1,084 8,129 71 13,988

Fair value adjustment on effective fair value hedges (note 40.2(v)) – 286 – – – 286

Net book value after fair value adjustment:At 31 December 2013 4,172 818 1,084 8,129 71 14,274

67


15 Intangible assets ContinuedExploration and evaluation assetsOn 12 March 2013, the Kurdistan Regional Government exercised its option of Government Participation in the Atrush block which could potentially reduce TAQA’s interest in the block from 53.2% to a minimum of 39.9%. The mechanism by which this will be achieved is still currently being negotiated including the settlement of outstanding petroleum costs owed to the contractors by the Government for its participating interest share. An amount of AED 187 million is held in a receivables account for reimbursement of petroleum costs. The transaction is expected to be finalised during 2015.

During the year ended 31 December 2014, TAQA Atrush successfully completed appraisal activities on phase 1 of the Atrush block. As a result, exploration and evaluation assets in the amount of AED 760 million were reclassified to development and production assets.

Tolling AgreementAs part of the acquisition of BE Red Oak Holding LLC on 31 December 2008, the Group acquired a fuel conversion services, capacity and ancillary services purchase agreement (“Tolling Agreement”) for an amount of AED 836 million (US$227.5 million). Under the terms of the Tolling Agreement, the Group is entitled to the economic rights (revenue from sale of electricity, capacity payments and any other ancillary services) of a power plant located in New Jersey, USA and the Group is obligated to supply the fuel and also make certain fixed and variable payments to the operator.

Connection rightsThe intangible assets arose from the transfer, made by the Company’s subsidiaries Emirates CMS Power Company, Shuweihat CMS International Power Company, Arabian Power Company and Taweelah Asia Power Company during the years ended 31 December 2002, 2005, 2006 and 2008 respectively, of certain assets to a related party in accordance with the terms of individual agreements. They represent the acquisition costs of the rights of connection to the transmission systems at the connection sites for a period of 38, 33, 37 and 40 years respectively. The connection rights cost are being amortised on a straight line basis over 38, 33, 37 and 40 years respectively, being the expected period of benefit.

16 Impairment testing of goodwillThe Group performs goodwill impairment testing on an annual basis, at the reporting date, and when there are indicators of impairment. Goodwill is allocated to four groups of cash-generating units (CGUs), which are also reportable operating segments, as follows:

• Power generation assets – others

• Oil and gas assets - Netherlands

• Oil and gas assets - North America

• Oil and gas assets - UKThe carrying amount of goodwill is allocated to each of the operating segments as follows:

Oil and gas –UK

AED million

Oil and gas –North

AmericaAED million

Oil and gas –NetherlandsAED million

Powergeneration

assets – otherAED million

TotalAED million

2014At 1 January 2014 2,386 4,370 1,271 102 8,129Impairment charge during the year (note 7) (805) (1,787) (111) – (2,703)Sale of assets – (14) – – (14)Exchange adjustment – – (144) – (144)

At 31 December 2014 1,581 2,569 1,016 102 5,268

2013At 1 January 2013 2,267 6,406 1,220 90 9,983Additions during the year 119 – – 12 131Impairment charge during the year (note 7) – (1,598) – – (1,598)Sale of assets – (21) – – (21)Exchange adjustment – (417) 51 – (366)

At 31 December 2014 2,386 4,370 1,271 102 8,129



Oil and gas assetsThe recoverable amount for oil and gas assets is based on either their fair value less costs of disposal (“FVLCD”) or, in the case of the Oil and gas assets – North America, their value in use (“VIU”). In determining FVLCD and VIU, appropriate discounted cash flow valuation models are used, incorporating market based assumptions. The key assumptions for the oil and gas asset FVLCD calculations are outlined below together with the approach management has taken in determining the value to ascribe to each. The valuation models are life of asset models and therefore no extrapolation assumptions have been necessary or applied. The fair value measurements were categorised as Level 3 fair values based on the inputs to the valuation models. As a result of the impairment analysis, management has recognised impairment charges as follows:

2014AED million

2013AED million

Oil and gas assets – Netherlands 111 –Oil and gas assets – North America 1,787 1,598Oil and gas assets – UK 805 –

2,703 1,598

The VIU was calculated after considering an agreement with a related party whereby, at the request of TAQA, the related party agrees to offer to purchase certain oil and gas assets of the segment at an agreed price.

The impairments above have resulted from a significant reduction in expected future commodity prices indicated by the current low price environment.

The calculation of both FVLCD and VIU for oil and gas assets is based upon the following key assumptions: • Reserve and resource volumes;

• Inflation rates;

• Commodity prices;

• Contingent resources valuation;

• Cash flows relating to gas storage;

• Foreign exchange rates; and

• Discount rates.In the case of VIU calculations, assumptions are also made regarding the cash flows from each asset’s ultimate disposal. The VIU of these oil and gas assets was calculated as AED 20,202 million pre-tax whilst the FVLCD of these assets was calculated as AED 13,587 million pre-tax.

Reserve and resource volumesReserve and resource volumes form the basis of the production profiles within the discounted cash flow models. Management engage external reserve auditors to review the Group’s internal estimates of volume, and where appropriate value, of proved, probable and possible reserves in each field and location based upon geological data and analysis. Where significant, the contingent resources within a segment are also reviewed and reported on. The data generated for each field and location takes into consideration the development plans approved by senior management and reasonable assumptions that an external party would apply in appraising the assets.

Inflation ratesEstimates are obtained from published indices for the countries from which products and services are originated, as well as data relating to specific commodities. Forecast figures are used if data is publicly available.

Contingent resources valuationContingent resources are valued internally and calibrated for reasonability with reference to any precedent transactions and/or publicly available comparable market data, using methods consistent with those applied to resource valuations.

Cash flows relating to gas storageCash flows relating to gas storage are based on assumptions on delivery capacity, injection capacity, working volumes and expected availability. The assumptions have been approved by management and in most cases validated by third party consultants, and are supported by non-binding expressions of interests on demand for working volumes.

Discount ratesDiscount rates used reflect the estimated weighted average cost of capital rates for potential acquirer Group companies developed for each of the locations. A post-tax discount rate ranging from 7.0% to 13.0% (2013: 7.0% to 7.5%) was used to calculate the FVLCD and VIU at the reporting date.

69


16 Impairment testing of goodwill ContinuedOil and gas assets continuedA summary of the key assumptions are provided below:WTI (US$/bbl): ranging from 57.5 to 93 (2015-2020(1))AECO gas (CAD$/mmbtu): ranging from 2.97 to 4.56 (2015-2020(1))Brent (US$/bbl): ranging from 62.5 to 98 (2015-2020(1))Summer/Winter gas spread (Euro/MWh): ranging from 2.0 to 3.5(2015-2020(2))(1) Prices are escalated at 2.1% thereafter.(2) After this period, prices increase in line with management’s estimates.

Power and water assetsThe recoverable amount for power and water assets is based on value in use (“VIU”). The Group estimates VIU by using discounted cash flow models. The cash flow models are typically life of facility (which significantly exceeds five years in most cases) and therefore no growth rate extrapolation assumptions have been necessary or applied. Management believes it is appropriate to use cash flow forecasts over such periods due to the long term power and water purchase agreements associated with the facilities. The future cash flows are discounted using a pre-tax rate ranging from 7% to 14% (2013: 9% to 12%).

The calculation of VIU for power and water generation assets is most sensitive to the following assumptions:

• Inflation rates;

• Discount rates.

Inflation ratesEstimates are obtained from published indices for the countries from which products and services are originated. Forecast figures are used if data is publicly available.

Discount ratesDiscount rates used represent the current market assessment of the risks specific to the assets, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates.

Sensitivity to changes in assumptionsThe impairment tests are particularly sensitive to commodity prices, foreign exchange rates and discount rates. Changes to the assumptions used in the impairment review would, in isolation, lead to an (increase)/decrease in the aggregate impairment loss of goodwill recognised in the year ended 31 December 2014 as follows:

Increase by 5%AED million

Decrease by 5%AED million

Commodity prices 1,160 (1,209)Foreign exchange rates (527) 499Discount rates (368) 333

17 Investment in associatesThe Group has the following investments in associates:

Country of incorporation and operation

Ownership

2014 2013

Massar Solutions PJSC UAE 49.0% 49.0%Jubail Energy Company Saudi Arabia 25.0% 25.0%Sohar Aluminium Company LLC Oman 40.0% 40.0%

The reporting dates for the associates are identical to TAQA. (i) Massar Solution PJSC (formerly Al Wathba Company for Central Services PJSC) is mainly involved in the leasing and management of

vehicles and equipment.(ii) Jubail Energy Company (“Jubail”) is involved in the generation of electricity.(iii) Sohar Aluminium Company LLC (“Sohar”) is involved in the ownership and operation of an aluminium smelter and an associated

combined cycle power plant.



The following table analyses the carrying amount and share of profit and other comprehensive income of TAQA’s associates.

2014AED million

2013AED million

Carrying amount of investments 726 592

Group’s share of the associates’:Profit for the year 123 128Other comprehensive income (loss) 37 (47)

Total comprehensive income 160 81

Share of associates’ hedging commitments at the reporting date is as follows:

Share of associates’ notional amount

Share of associates’ derivative liabilities Fixed leg on instrument

Associate2014

AED million2013

AED million2014

AED million2013

AED million 2014 2013

Sohar (note a) 776 829 49 84 4.74% to 4.88% 4.74% to 4.88%Jubail (note b) 53 64 4 6 4.57% 4.57%

53 90

a) In order for Sohar to reduce its exposure to interest rates fluctuations on loans from banks, the associate has entered into an interest rate arrangement with counterparty banks for a notional amount that mirrors the draw down and repayment schedule of the loans. The derivative instruments are entered into for the purpose of a cash flow hedge.

b) In order for Jubail to reduce its exposure to interest rates fluctuations on loans from banks, the Company’s associate has entered into an interest rate arrangement with counterparty banks for a notional amount that mirrors the draw down and repayment schedule of the loans.

18 Investment in joint ventureThe Group has the following investments in joint ventures:

Principal activity

Country of incorporation and operation

Ownership

2014 2013

LWP Lessee, LLC Wind Power U.S.A 50.0% 50.0%

The Group’s joint venture is accounted for using the equity method and the reporting date of the joint venture is identical to TAQA. The following table analyses the carrying amount and share of profit of the Group’s joint ventures.

2014AED million

2013AED million

Carrying amount of investment in joint ventures 151 144

Share of joint ventures’ profit for the year 31 105

(i) On 30 December 2013, the Group disposed of its 50% interest in Noordgastransport B.V. for a total consideration of AED 814 million (EUR 161 million) realising a gain of AED 123 million. The disposal also resulted in a transfer of AED 69 million from the foreign currency translation reserve, resulting in a net gain of AED 54 million recognised in the consolidated income statement. Prior to the disposal, the Group received a dividend of AED 61 million from Noordgastransport B.V. This was recognised within other investment income in the consolidated income statement as equity accounting ceased in September 2013, when the investment was classified as held for sale.

71


19 Advance and loans to associates2014

AED million2013

AED million

Mezzanine loan – non-current 398 398Advance - current 467 570Others - current 8 13

873 981

The balances above mainly arise from loans and advances made to Sohar Aluminium Company LLC in previous years. The advance is repayable on demand and has therefore been classified as a current asset in the consolidated statement of financial position. An amount of AED 103 million (2013: AED 110 million) was repaid, in relation to the advance, during the year. The mezzanine loan is interest bearing at a rate equal to the lowest rate of interest payable on Sohar’s Senior Debt less a discount of 5bp, as approved by its shareholders.

20 Other assets2014

AED million2013

AED million

Deferred expenditure 122 165Initial spares fee (note (i)) 31 43Derivatives (effective hedges) - interest rate swaps (note 40.1) – 115Derivatives (effective hedges) - forward foreign exchange contracts (note 40.1) 31 75Others 52 82

236 480

(i) Initial spares fee:2014

AED million2013

AED million

Cost:Balance at 1 January and 31 December 146 146

Amortisation:At 1 January (103) (91)Charge for the year (note 6) (12) (12)At 31 December (115) (103)

Net carrying amount at 31 December 31 43

21 Inventories2014

AED million2013

AED million

Fuel and crude oil 1,726 1,637Spare parts and consumables 1,427 1,275

3,153 2,912

Provision for slow moving and obsolete items (190) (180)

2,963 2,732

The cost of inventories recognised as an expense in the consolidated income statement is AED 3,747 million (2013: AED 3,276 million).Inventories with a carrying amount of AED 2,833 million (2013: AED 2,584 million) are pledged as security for loans of the UAE

domestic subsidiaries and certain foreign subsidiaries in the power business.

22 Accounts receivable and prepayments2014

AED million2013

AED million

Trade receivables (note (i)) 1,272 1,096Amounts due from related parties (note (ii)) 1,308 1,161Accrued revenue 993 1,148Advances to O&M contractors 113 527Crude stock underlift 186 343Deposits 24 71Advances to suppliers 71 23Prepaid insurance 37 17Income tax 435 244Derivatives in effective hedges – forward foreign exchange contracts (note 40.1) 5 20Derivatives in effective hedges – interest rate swaps (note 40.1) – 41Derivatives in effective hedges – futures and forward contracts (note 40.1) – 225Other receivables 713 716

5,157 5,632



(i) Trade receivablesAs at 31 December 2014, trade receivables with a nominal value of AED 16 million (2013: AED 17 million) were impaired and fully provided for. Trade receivables are non-interest bearing and are recoverable within 30 - 90 working days. Movements in the provision for impairment of receivables are as follows:

2014AED million

2013AED million

At 1 January 17 49Provision movement (1) (32)


As at 31 December, the ageing analysis of trade receivables is as follows:

Past due but not impaired

TotalAED million

Neither pastdue nor

impairedAED million

< 30days

AED million

30 – 60days

AED million

60 – 90days

AED million

90 – 120days

AED million

>120days

AED million

2014 1,272 749 264 216 1 1 41

2013 1,096 212 432 317 – 1 134

Subsequent to the reporting date, the Group collected AED 7 million (2013: AED 13 million) of balances past due for more than 120 days.

(ii) Amounts due from related parties2014

AED million2013

AED million

Abu Dhabi Water and Electricity Company (ADWEC) 1,302 1,158Others 6 3

1,308 1,161

The amounts due from ADWEC, a fellow subsidiary of ADWEA, in respect of available capacity and supply of water and electricity, are payable within 30 - 90 working days.

As at 31 December 2014, amounts due from related parties at nominal value of AED 14 million (2013: AED 14 million) were impaired and fully provided for. Movements in the provision for impairment of amounts receivable from related parties are as follows:

2014AED million

2013AED million

At 1 January 14 13Charge for the year – 1


As at 31 December, the ageing analysis of receivables from related parties is as follows:

Past due but not impaired

TotalAED million

Neither past due nor

impairedAED million

< 30days

AED million

30 – 60days

AED million

60 – 90days

AED million

90 – 120days

AED million

>120days

AED million

2014 1,308 912 – 352 1 1 42

2013 1,161 806 – 333 – – 22

Trade receivables and amounts due from related parties net of provisions are expected, on the basis of past experience, to be fully recoverable.

23 Cash and cash equivalents2014

AED million2013

AED million

Cash at banks and on hand 3,291 3,870Short-term deposits 361 170

3,652 4,040Bank overdrafts (122) (94)

3,530 3,946

Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. Bank overdrafts carry interest at floating rates and are secured by guarantees from certain shareholders of the subsidiaries.

73


23 Cash and cash equivalentsContinuedAt 31 December 2014, the Group had available AED 11,471 million (2013: AED 10,960 million) of undrawn committed borrowing facilities in respect of which all conditions precedent have been met.

24 Share capital24.1 Issued capital

2014AED million

2013AED million

Share Capital 6,225 6,225Cancellation of treasury shares (See note 24 (ii)) (159) –

6,066 6,225

24.2 Treasury shares2014

AED million2013

AED million

Opening balance at 1 January 293 293Cancellation of treasury shares (293) –

Closing balance – 293

On 4 February 2014, the Board approved the cancellation of 158,713,000 treasury shares. The articles of association were amended and approved by the shareholders at their extraordinary general meeting held on 22 April 2014 to reflect the new number of issued and outstanding shares of the Company. The cancellation of the AED 293 million treasury shares was recorded against share capital (AED 159 million) and other reserves (AED 134 million).

24.3 Contributed capital2014

AED million2013

AED million

Opening balance at 1 January 325 325Transfer to retained earnings (300) –

Closing balance 25 325

The transfer to retained earnings represents the excess of fair value over the consideration paid for an investment carried at FVOCI transferred from Abu Dhabi Water & Electricity Authority during 2010. The investment was disposed of during 2012 and as such a profit was realised and the contributed capital has been transferred to retained earnings.

25 Reserves25.1 Other reserves

Statutoryreserve

AED million

Legalreserve

AED million

Generalreserve

AED millionTotal

AED million

Balance at 1 January 2013 2,812 626 750 4,188Transfers during the year – 102 – 102

Balance at 31 December 2013 2,812 728 750 4,290Cancellation of treasury shares (134) – – (134)Transfers during the year – 79 (750) (671)

Balance at 31 December 2014 2,678 807 – 3,485

Statutory reserveAs required by the UAE Commercial Companies Law of 1984 (as amended) and the Articles of Association of the Company and its subsidiaries, 10% of the consolidated profit for the year is transferred to the statutory reserve. The Company and its subsidiaries may resolve to discontinue such transfers when the reserve equals 50% of the share capital. The reserve is not available for distribution.

Legal reserve – subsidiariesIn accordance with the Articles of Association of certain domestic subsidiaries, 10% of the profit for the year is transferred to a legal reserve. The subsidiaries may resolve to discontinue such annual transfers when the reserve totals 50% of their share capital or in accordance with a resolution taken to this effect by the shareholders at the Annual General Meeting upon the recommendation of the Board of Directors of these subsidiaries. This reserve may only be used for the purposes recommended by the Board of Directors and approved by the shareholders of the subsidiaries.

General reserve The Group has established a general reserve to enhance the capital base of the Company. This reserve may only be used for the purposes recommended by the Board of Directors and approved by the shareholders of the Company. During the year, the Board of Directors approved the transfer of the whole of the general reserve to retained earnings.



25.2 Retained earningsCancellation of loans from ADWEADuring December 2014, TAQA’s parent company, ADWEA issued a resolution to waive all existing loan agreements and related interest payable to ADWEA from TAQA, free of costs. An amount of AED 2,919 million was transferred directly to retained earnings from loans from ADWEA (note 29 and note 36) and accrued interest.Adjustment on repayment of interest free loan by partially owned subsidiary During 2009, TAQA’s partially owned subsidiary RPC was granted a sub-ordinated loan amounting to AED 125 million. The loan was interest free and unsecured and due for repayment in full at the earlier of refinancing and August 2031. On inception, the Company’s management measured the loan at its fair value of AED 27 million. During August 2013, RPC refinanced and paid off the shareholder loan. At the time of repayment, the shareholder loan had a carrying value of AED 36 million. This transaction resulted in an increase to the Group’s retained earnings of AED 35 million which was adjusted against the non-controlling interests.Changes in ownership interest of subsidiariesDuring December 2013, Jorf Lasfar Energy Company, S.A, a 100% subsidiary of TAQA, issued new shares through a private placement by Moroccan institutional investors and an initial public offering on the Casablanca Stock Exchange. Following the share issuance, the Group still controls Jorf Lasfar Energy Company, S.A and retains 85.79% of the ownership interests. The transaction has been accounted for as an equity transaction with non-controlling interests, resulting in the following:

AED million

Proceeds from sale of 14.21% ownership interest 673Net assets attributable to non-controlling interest (469)

Increase in equity attributable to parent 204

Represented by:Increase in retained earnings 204

Directly attributable transaction costs of AED 15 million have been allocated to the non-controlling interest.

25.3 Foreign currency translation reserve The translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.

As of 1 January 2014, the long term funding of TAQA North was redenominated from Canadian dollars to US dollars and as a result, TAQA North changed its functional currency from Canadian dollars to US dollars. TAQA North’s functional currency is determined based upon the secondary factors contained within IAS 21, whereby the currency of the long term funding determines the functional currency. The secondary factors are relevant because the primary indicators of functional currency contained within IAS 21 The Effects of Changes in Foreign Exchange Rates indicate that both Canadian dollar and US dollar functional currency are equally relevant for TAQA North. In accordance with the requirements of IAS 21, the change has been applied prospectively, with all of TAQA North’s assets, liabilities and equity items being translated into US dollars at the exchange rate on 1 January 2014. The cumulative translation adjustment associated with TAQA North will remain in equity and only be adjusted on disposal or partial disposal of TAQA North.

26 Dividends paid and proposedDividend on ordinary shares paid during 2013 amounted to AED 607 million relating to the year ended 31 December 2012.

27 Non-controlling interests2014

AED million2013

AED million

Relating to Abu Dhabi Water and Electricity Authority (ADWEA) 477 299Relating to non-controlling interest shareholdings in subsidiaries 3,104 3,296

3,581 3,595

ADWEA is treated as a non-controlling interest in these consolidated financial statements due to its 10% equity interest in eight domestic subsidiaries of TAQA (refer to note 39 for details).

Financial information of subsidiaries that have material non-controlling interests are provided below:

Proportion of equity interests held by non-controlling interests

Country of incorporation and operation 2014 2013

Gulf Total Tractebel Power Company PJSC UAE 46.0% 46.0%Arabian Power Company PJSC UAE 46.0% 46.0%Shuweihat CMS International Power Company PJSC UAE 46.0% 46.0%Taweelah Asia Power Company PJSC UAE 46.0% 46.0%Emirates SembCorp Water and Power Company PJSC UAE 46.0% 46.0%Fujairah Asia Power Company PJSC UAE 46.0% 46.0%Ruwais Power Company PJSC UAE 46.0% 46.0%Emirates CMS Power Company PJSC UAE 46.0% 46.0%

75


27 Non-controlling interestsContinuedAll of the Group’s subsidiaries that have material non-controlling interest are similar in nature. Therefore the following disclosures have been provided on an aggregated basis:

2014AED million

2013AED million

Revenue 7,008 7,007Profit 1,484 1,561Other comprehensive income (572) 3,129

Total comprehensive income 912 4,690

Profit allocated to non-controlling interests 683 718Other comprehensive allocated to non-controlling interests (263) 1,439Non-current assets 44,460 45,757Current assets 10,062 5,558Non-current liabilities (38,055) (39,099)Current liabilities (3,848) (4,172)

Total equity 12,619 8,044

Equity attributable to parent 6,814 4,344Equity attributable to non-controlling interests 5,805 3,700

12,619 8,044

Cash flows from operating activities 3,331 5,367Cash flows used in investing activities (537) (1,000)Cash flows used in financing activities (2,707) (4,444)

Net increase (decrease) in cash and cash equivalents 87 (77)

Dividends paid to non-controlling interests 379 414

28 Loans from non-controlling interest shareholders in subsidiaries2014

AED million2013

AED million

S2 Offshore Holding Company 252 266Fujairah F2 CV 195 210Asia Gulf Power Holding 110 134Shuweihat Limited Partnership 32 32

589 642

The above loans are interest free, with no repayment terms and are unsecured and are subject to terms of repayment as resolved by the Board of Directors of the subsidiaries. Accordingly they have been treated as equity.

29 Loan from Abu Dhabi Water and Electricity Authority (ADWEA)Movement in the loan balance during the year is as follows:

2014AED million

2013AED million

At 1 January 2,624 2,655Received during the year – 5Cancellation of loan (note 25.2) (2,611) –Repaid during the year (13) (36)

At 31 December – 2,624

The above loans were interest free, with no repayment terms and were unsecured and were subject to terms of repayment as resolved by the Board of Directors of TAQA. Accordingly they were treated as equity.

30 Interest bearing loans and borrowings2014

AED million2013

AED million

Revolving credit facilities (note i) 5,932 6,156Abu Dhabi National Energy Company Global Medium Term notes (note ii) 18,263 22,646Abu Dhabi National Energy Company bonds (note iii) 10,484 6,974Ruwais Power Company bond (note iv) 2,963 2,948Term loans (note v) 36,797 38,606

74,439 77,330



Disclosed in the consolidated statement of financial position as follows:2014

AED million2013

AED million

Non-current liabilities 72,380 71,058Current liabilities 2,059 6,272

74,439 77,330

The Group’s interest bearing loans and borrowings (before deducting prepaid finance costs) are repayable as follows:

2014AED million

2013AED million

Within 1 year 5,736 10,517Between 1 – 2 years 5,863 1,926Between 2 - 3 years 8,607 7,603Between 3 - 4 years 7,063 6,712Between 4 - 5 years 4,382 6,840After 5 years 43,606 44,437

75,257 78,035

(i) Revolving credit facilitiesNon-current liabilities

2014AED million

2013AED million

CAD 1.0 billion facility, net of transaction costs (note a) 1,688 1,945USD 3.5 billion facility, net of transaction costs (note b) 3,621 4,211JPY 20.4 billion facility, net of transaction costs (note c) 623 –

5,932 6,156

a) TAQA North is the borrower of a CAD 1.0 billion 3 year revolving facility with TAQA providing a parent guarantee. At 31 December 2014, an amount of CAD 534 million (AED 1,688 million) (2013: CAD 0.6 billion, AED 1.9 billion) was outstanding under this credit facility.

b) On 13 December 2012, TAQA refinanced Tranche “A” of its revolver facility with a US$2.5 billion dual tranche, multicurrency revolver facility with a syndicate of 26 banks. Amounts borrowed under Tranche “B” (US$1 billion 5 year facility) carry interest of LIBOR or EIBOR plus a margin. Amounts borrowed under new Tranche “A” facility carry interest of LIBOR plus a margin. At 31 December 2014, amounts of USD 698 million (2013: USD 577 million) and EUR 240 million (2013: EUR 414 million), (AED 3.6 billion) (2013: AED 4.2 billion) were drawn under these facilities.

c) On 17 April 2014, TAQA signed a JPY 20.4 billion (AED 735 million) Samurai term loan facility agreement. The five-year loan was arranged by Bank of Tokyo-Mitsubishi UFJ at a rate of 60 basis points over Japanese Yen LIBOR, and has been fully hedged into US dollars (Note 40). At 31 December 2014, an amount of AED 623 million was drawn under this facility.

(ii) Abu Dhabi National Energy Company Global Medium Term NotesAbu Dhabi National Energy Company global medium term notes are recorded at amortised cost using effective interest rates and are direct, unconditional, and unsecured obligations of TAQA. The following table summarises the terms of the notes payable:

Issue rate %

Effectiveinterest rate

%Repayment

date2014

AED million2013

AED million

US$1,200,000,000, net of discount and transaction costs 99.45% 4.92% September 2014 – 4,400Total current – 4,400Non-current liabilitiesUS$500,000,000, net of transaction costs 100% 6.18% October 2017 1,836 1,836US$500,000,000, net of discount and transaction costs 99.85% 7.29% August 2018 1,834 1,834US$500,000,000, net of discount and transaction costs 99.20% 6.40% September 2019 1,825 1,823US$750,000,000, net of discount and transaction costs 99.50% 4.34% March 2017 2,743 2,739US$750,000,000, net of discount and transaction costs 99.48% 2.50% January 2018 2,738 2,733US$750,000,000, net of discount and transaction costs 99.52% 6.00% December 2021 2,735 2,734US$1,250,000,000, net of discount and transaction costs 99.40% 3.63% January 2023 4,552 4,547

Total non-current 18,263 18,246

Total 18,263 22,646

The notes liability is stated net of discount and transaction costs incurred in connection with the notes arrangements, amounting to AED 102 million as of 31 December 2014 (2013: AED 127 million), which are amortised to the consolidated income statement over the repayment period of the notes using the effective interest rate method. Interest on the US dollar notes is payable semi-annually. Accrued interest is included under accruals and other liabilities.

In accordance with the repayment terms, TAQA repaid the USD 1,200 million bond during 2014 (2013: Euro 750 million).

77


30 Interest bearing loans and borrowingsContinued(iii) Abu Dhabi National Energy Company BondsIn 2006, TAQA issued long term fixed interest rate bonds at a discount. The bonds are recorded at amortised cost using effective interest rates and are direct, unconditional, and unsecured obligation of the Company.

On 30 April 2014, TAQA finalised the issuance of US$750 million (AED 2,755 million) with a coupon of 3.875% and Euro 180 million (AED 804 million) with a coupon of 2.75% senior notes due in May 2024.

The following table summarises the terms of the bond payable:

Issue rate%


%Repayment

date2014

AED million2013

AED million

Non-current liabilitiesUS$1,000,000,000, net of discount and transaction costs 99.485% 5.98% October 2016 3,665 3,662US$1,500,000,000, net of discount and transaction costs 99.049% 6.6% October 2036 3,313 3,312Euro 180,000,000 net of discount and transaction costs 97.62% 3.1% May 2024 781 –US$750,000,000 net of discount and transaction costs 99.37% 4.02% May 2024 2,725 –

Total 10,484 6,974

The bonds liability is stated net of discount and transaction costs incurred in connection with the bond arrangements, amounting to AED 99 million as of 31 December 2014 (2013: AED 51 million), which are amortised in the consolidated income statement over the repayment period of the bond using the effective interest rate method.

Interest on the US dollar bonds is payable semi-annually. Accrued interest is included under accruals and other liabilities.

(iv) Ruwais Power Company BondDuring 2013, Ruwais Power Company, a subsidiary of the Group, issued a long term fixed interest rate bond of US$825 million (AED 3,030 million). The bond is recorded at amortised cost using the effective interest rate and is secured by a number of security documents including the subsidiary’s contractual rights, cash deposits, other assets and guarantees. The bond carries a coupon of 6% with maturity in August 2036.

Issue rate%


%Repayment

date2014

AED million2013

AED million

Non-current liabilityUS$825,000,000 bond net of discount and transaction costs 6.0% 6.22% August 2036 2,963 2,948

The bond liability is stated net of transaction costs incurred in connection with the bond arrangement, amounting to AED 67 million as of 31 December 2014 (2013: AED 82 million), which are amortised in the consolidated income statement over the repayment period of the bond using the effective interest rate method. Interest on the bonds is payable semi-annually.

(v) Term loansTerm loans which are shown at amortised cost are in respect of the following subsidiaries:

2014AED million

2013AED million

Emirates CMS Power Company PJSC (ECPC) 608 703Gulf Total Tractebel Power Company PJSC (GTTPC) 3,386 3,525Shuweihat CMS Power Company PJSC (SCIPCO) 2,055 2,272Arabian Power Company PJSC (APC) 2,165 2,342Taweelah Asia Power Company PJSC (TAPCO) 5,620 5,989Emirates SembCorp Water and Power Company PJSC (ESWPC) 3,757 3,913Fujairah Asia Power Company PJSC (FAPCO) 7,135 7,381Ruwais Power Company PJSC (RPC) 4,953 5,098Jorf Lasfar Energy Company S.A. 1,969 2,352Jorf Lasfar Energy Company 5&6 S.A. 3,643 3,679TAQA Neyveli Power Company Private Limited 14 70Himachal Sorang Power Limited 375 361Takoradi International Company 1,117 921

36,797 38,606



Details of term loans by subsidiaries are as follows:

Emirates CMS Power Company PJSC (ECPC):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentTerm loan (1) LIBOR + (1.15% – 1.30%) 2015 96 95

Non-currentTerm loan (1) LIBOR + 1.30% 2016 – 2020 512 608

Total 608 703

The term loan facility (1) is repayable in half yearly instalments until June 2020 in accordance with an agreed upon instalment schedule. Term loan (1) is secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of ECPC, a pledge of shares in the company by both shareholders and a pledge of equity interest in Taweelah Shared Facilities Company LLC. Term loan (1) is also subject to various covenants as stipulated in the loan facility agreement. Term loan (1) is stated net of prepaid finance cost of AED 11 million (2013: AED 13 million).

Under the terms of its loan facility agreement, ECPC is required to enter into interest rate swap agreements to mitigate its interest rate exposure (note 40).

Gulf Total Tractebel Power Company PJSC (GTTPC):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentTerm loan LIBOR + 0.5% 2015 149 139

Non-currentTerm loan LIBOR + (0.5% – 0.95%) 2016 – 2029 3,237 3,386

Total 3,386 3,525

The term loan is secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of GTTPC, a pledge of shares in the Company by both shareholders and a pledge of equity interest in Taweelah Shared Facilities Company LLC. The term loan is also subject to various covenants as stipulated in the loan facility agreement.

Under the terms of its Facility Agreement, GTTPC is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

The term loan above is stated net of prepaid finance cost of AED 21 million (2013: AED 22 million).

Shuweihat CMS Power Company PJSC (SCIPCO):Effectiveinterest rate% Maturity

2014AED million

2013AED million


Non-currentTerm loan LIBOR + 1.40% 2016 – 2021 1,830 2,054

Total 2,055 2,272

The amount of the conventional term loan facility is US$1,035 million (AED 3,802 million) and is repayable in 35 semi-annual instalments starting from December 2004 in accordance with an agreed upon instalment schedule.

The term loan is secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of SCIPCO. The term loan is also subject to various covenants as stipulated in the loan facility agreement.

Under the terms of its loan facility agreement, SCIPCO is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

The term loan is stated net of prepaid finance costs of AED 15 million (2013: AED 19 million).

Arabian Power Company PJSC (APC):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentTerm loan LIBOR + (1.15% – 1.30%) 2015 185 177


Total 2,165 2,342

79


30 Interest bearing loans and borrowingsContinued(v) Term loans continuedDuring 2003, APC obtained loan facilities from a syndicate of banks to finance the acquisition, refurbishment and extension of the UAN power and desalination plant.

The term loan facility is US$855 million (AED 3,140 million) and was fully drawn at 31 December 2008. The term loan facility is repayable from January 2009 in accordance with an agreed upon repayment schedule with the last repayment due on 21 July 2023.

The loan is secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of APC and a pledge of the shares in the Company by both shareholders. The loan is also subject to various covenants as stipulated in the loan facility agreement.

Under the terms of its loan facility agreement, APC is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

The term loan is stated net of prepaid finance costs of AED 21 million (2013: AED 22 million).

Taweelah Asia Power Company PJSC (TAPCO):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentTerm loan (1) LIBOR + 0.65% 2015 170 159Term loan (2) LIBOR + 0.825% 2015 225 210

395 369

Non-currentTerm loan (1) LIBOR + 0.65% 2016 – 2025 2,250 2,420Term loan (2) LIBOR + 0.825% 2016 – 2025 2,975 3,200

5,225 5,620

Total 5,620 5,989

During 2005, TAPCO obtained loan facilities from a syndicate of banks to finance the acquisition, refurbishment and extension of the Taweelah B power and water desalination plant.

The term loan facility (1) amounting to US$911 million (AED 3,346 million) was fully drawn during 2008. Term loan facility (1) is stated net of prepaid finance cost of AED 29 million (2013: AED 32 million). The term loan facility (2) amounting to US$1,200 million (AED 4,407 million) was fully drawn during 2008. Term loan facility (2) is stated net of prepaid finance cost of AED 26 million (2013: AED 28 million).

The loans are secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of TAPCO and a pledge of shares in the Company by both shareholders. The loans are also subject to various covenants as stipulated in the loan facility agreement.

Under the terms of its loan facility agreement, TAPCO is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

Emirates SembCorp Water and Power Company PJSC (ESWPC):Effectiveinterest rate% Maturity

2014AED million

2013AED million


Non-currentTerm loan LIBOR + 0.85% 2016 – 2029 3,610 3,758

Total 3,757 3,913

During 2006, ESWPC obtained loan facilities from a syndicate of banks to finance the acquisition and extension of the Fujairah Power and Desalination Plant.

The amount of the term loan facility is US$1,270 million (AED 4,667 million). The term loan is repayable from February 2010 in accordance with an agreed upon repayment schedule with the last repayment on 31 January 2029. The term loan is stated net of prepaid finance costs of AED 29 million (2013: AED 31 million).

The loans are secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of the ESWPC and a pledge of shares in the Company by both shareholders. The loans are also subject to various covenants as stipulated in the loan facility agreements.

Under the terms of its loan facility agreement, ESWPC is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).



Fujairah Asia Power Company PJSC (FAPCO):Effectiveinterest rate % Maturity

2014AED million

2013AED million

CurrentTerm loan (1) LIBOR + 0.60% 2015 113 100Term loan (2) LIBOR + 0.50% 2015 170 149

283 249

Non-currentTerm loan (1) LIBOR + 0.60% 2016 – 2030 2,741 2,851Term loan (2) LIBOR + 0.50% 2016 – 2030 4,111 4,281

6,852 7,132

7,135 7,381

During 2007, the Company obtained loan facilities from a syndicate of banks (term loan facilities (1) and (2) to finance the construction of the Fujairah F2 power production and water desalination plant.

The term loan facility (1) is AED 3,144 million was fully drawn down in 2011. The term loan is repayable from 28 January 2011 in accordance with an agreed upon repayment schedule with the last repayment due on 28 July 2030. Term loan (1) is stated net of prepaid finance cost of AED 37 million (2013: AED 40 million).

The term loan facility (2) is AED 4,716 million was fully drawn down in 2011. The term loan is repayable from 28 January 2011, in accordance with an agreed upon repayment schedule, with the last repayment due on 28 July 2030. Term loan (2) is stated net of prepaid finance cost of AED 51 million (2013: AED 54 million).

The loans are secured by a number of security documents including a commercial mortgage over all tangible and intangible assets of FAPCO. The loans are also subject to various covenants as stipulated in the loan facility agreement.

Under the terms of its loan facility agreement, FAPCO is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

Ruwais Power Company PJSC (RPC):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentInterest bearing term loans LIBOR + (1.75 % – 2.5%) 2015 136 150

Non-currentInterest bearing term loans LIBOR + (1.75 % – 2.5%) 2016 - 2031 4,817 4,948

4,953 5,098

During 2009, the Company obtained term loans facility of US$2,025 million with a stand-by facility of US$67 million (respectively AED 7,437 million and AED 246 million), of which US$2,205 million (AED 7,437 million) was drawn at 31 December 2011. The standby facility was cancelled in 2012. The loans are repayable starting February 2012 in accordance with an agreed upon repayment schedule with the last repayment on 31 August 2031.

The loans carry interest at a variable rate of LIBOR plus a margin ranging from 1.75% and 2.5% per annum. Upon the issuance of the bond in 2013, the Company made an early repayment of AED 1,981 million of the term loans. The term loans are stated net of prepaid finance costs of AED 174 million (2013: AED 184 million).

The loans are secured by a number of security documents including a commercial mortgage over all assets of the Company. The loans are also subject to various covenants as stipulated in the loan facility agreement. Under the terms of the loan facility agreement, the Company is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

Jorf Lasfar Energy Company S.A. (JLEC):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentTerm loan 5.637% 2015 162 179

Non-currentTerm loan 5.637% 2016 – 2027 1,807 2,173

Total 1,969 2,352

During the year ended 31 December 2009, TAQA’s wholly owned subsidiary JLEC assumed an 18 year loan with a syndicate of banks MAD 7,400 million (AED 3,440 million) with a yearly variable interest rate capped at 6.75%. The principal and interest are to be paid quarterly with the final instalment maturing on 31 March 2027.

81


30 Interest bearing loans and borrowingsContinued(v) Term loans continuedJorf Lasfar Energy Company S.A. (JLEC): continuedAt 31 December 2014, MAD 4,874 million (AED 1,969 million) (2013: MAD 5,243 million, AED 2,352 million) was outstanding on this loan. The term loan is secured by a number of security documents including the subsidiary’s contractual rights, cash deposits, other assets and guarantees from the Moroccan Government and TAQA.

Jorf Lasfar Energy Company 5&6 S.A. (JLEC 5&6):Effectiveinterest rate% Maturity

2014AED million

2013AED million

CurrentTerm loan LIBOR + (3.92% – 7.00%) 2015 254 72


Total 3,643 3,679

During the year ended 31 December 2012, JLEC 5&6 secured multi-currency debt facilities totalling approximately US$1.4 billion equivalent (AED 5.1 billion) with several lenders. These facilities are comprised of a US$216.0 million term facility, Euro term facilities totalling EUR 456.2 million, and Moroccan Dirham facilities totalling MAD 5,450 million. The Moroccan Dirham facilities consist of a MAD 4.5 billion term loan facility, MAD 700 million medium-term VAT facility and MAD 250 million working capital facility that is renewable annually. Interest is payable semi-annually on amounts borrowed under all term loans and the VAT facility, and quarterly under the working capital facility. The USD and EUR term loan facilities and the MAD working capital facility carry interest at applicable reference interest rates plus margins. The MAD term loan and VAT facility are fixed rate loans. Loan principal drawn under the term loan facilities is repayable semi-annually according to repayment schedules specified in each loan facility, through the final scheduled repayment date of 31 May 2028.

The loans are secured by a number of security documents including security assignments/pledges over the subsidiary’s contractual rights, cash deposits, accounts receivable, and other assets, as well as pledges over the shares of JLEC 5&6 and its offshore shareholder, TAQA Power Ventures B.V. and guarantees from the Moroccan government and TAQA.

At 31 December 2014, US$992 million (AED 3,643 million) (2013: US$1,002 million (AED 3,679 million) was outstanding on this loan.

Under the terms of its loan facility agreement, JLEC 5&6 is required to enter into interest rate swap agreements and foreign exchange swap agreements to hedge its interest cost exposure against fluctuations in interest rates and foreign exchange exposure against fluctuations in foreign exchange rates (note 40).

TAQA Neyveli Power Company Private Limited:Effectiveinterest rate% Maturity

2014AED million

2013AED million

Current Term loan 9.39% 2015 14 56

Non-currentTerm loan 9.39% 2015 – 14

Total 14 70

The Company’s subsidiary TAQA Neyveli Power Company has term loans amounting to AED 14 million as of 31 December 2014 (2013: AED 70 million). An amount of INR 241 million (AED 14 million) is repayable quarterly with the final instalment maturing on 31 March 2015. The loan carries a variable interest rate at a stipulated spread below the respective Prime Lending Rates (PLR) of the lending banks.

The term loan is secured by a number of security documents including a commercial mortgage over all assets of the subsidiary.



Himachal Sorang Power Limited (HSPL):Effectiveinterest rate% Maturity

2014AED million

2013AED million

Current Term loan 12.73% 2015 13 13

Non-currentTerm loan 12.73% 2016 – 2025 362 348

Total 375 361

HSPL has term loans amounting to AED 375 million (INR 6,471 million) (2013: AED 361 million (INR 6,076 million)) with principal to be repaid quarterly with the final instalment maturing on 1 January 2025.

The term loan is secured by a number of security documents including a first mortgage over all assets of the subsidiary.

Takoradi International Company (TICO):Effectiveinterest rate% Maturity

2014AED million

2013AED million

Non-currentTerm loan LIBOR + (4.25% – 4.35%) 2016 – 2025 1,117 921

During the year ended 31 December 2012, TICO secured debt facilities worth US$330 million (AED 1,211 million). Amounts borrowed under these facilities carry interest of 6 month LIBOR plus of 4.35% for the International Finance Corporation facility and 4.25% for the Development Finance Institution facility. The term loan are secured by a number of security documents including the subsidiary’s contractual rights, cash deposits, other assets and guarantees.

Under the terms of its loan facility agreement, TICO is required to enter into interest rate swap agreements to hedge its interest cost exposure against fluctuations in interest rates (note 40).

31 Islamic loansIslamic loans are with respect to the following subsidiaries:

2014AED million

2013AED million

Shuweihat CMS Power Company PJSC 518 572Emirates CMS Power Company PJSC 236 273Arabian Power Company PJSC 633 685Abu Dhabi National Energy Company PJSC 679 725

2,066 2,255

Disclosed in the consolidated statement of financial position as follows:Non-current liabilities 1,918 2,112Current liabilities 148 143

2,066 2,255

The Group’s Islamic loans (before deducting prepaid finance costs) are repayable as follows:

2014AED million

2013AED million

Within 1 year 150 145Between 1 – 2 years 158 150Between 2 - 3 years 169 158Between 3 - 4 years 181 169Between 4 - 5 years 205 181After 5 years 1,220 1,475

2,083 2,278

83


31 Islamic loansContinued(i) Shuweihat CMS Power Company PJSC

Effectiverental rate% Maturity

2014AED million

2013AED million

CurrentIslamic Ijara loan LIBOR + 1.40% 2015 56 54

Non-currentIslamic Ijara loan LIBOR + 1.40% 2016 – 2021 462 518

Total 518 572

The Islamic Ijara loan is secured by an assignation of identified parts of the plant and equipment purchased under the Islamic financing arrangement, and is repayable in 35 semi-annual instalments starting from December 2004.

The Islamic Ijara loan is stated net of prepaid finance costs of AED 7 million (2013: AED 9 million).Under the terms of its loan facility agreements, the subsidiaries are required to enter into rental rate swap agreements to hedge

their rental cost exposure against fluctuations in rental rates (note 40).

(ii) Emirates CMS Power Company PJSCEffectiverental rate% Maturity

2014AED million

2013AED million

CurrentIslamic Ijara loan LIBOR + (1.15% – 1.30%) 2015 38 37

Non-currentIslamic Ijara loan LIBOR + 1.30% 2016 – 2020 198 236

Total 236 273

The Islamic Ijara loan is secured by an assignment of identified parts of the plant and equipment purchased under the Islamic financing arrangement, and is repayable in thirty three semi annual instalments commencing from 30 June 2004. A fluctuating profit charge is paid under the Islamic financing agreement, which is based on LIBOR plus a margin.

Under the terms of its loan facility agreements, the subsidiaries are required to enter into rental rate swap agreements to hedge their rental cost exposure against fluctuations in rental rates (note 40).

The Islamic Ijara loan is stated net of prepaid finance costs of AED 3 million (2013: AED 3 million).

(iii) Arabian Power Company PJSCEffectiverental rate% Maturity

2014AED million

2013AED million

CurrentMuqawala LIBOR + (1.15% – 1.30%) 2015 54 52

Non-currentMuqawala LIBOR + (1.15% – 1.65%) 2016 – 2023 579 633

Total 633 685

The Muqawala loan is in respect of the procurement and manufacturing of certain generation assets under an Islamic loan facility agreement dated 2 July 2003. The facility of US$250 million (AED 918 million) is repayable in thirty semi annual instalments commencing from January 2009. The Muqawala loan is stated net of prepaid finance costs of AED 6 million (2013: AED 6 million).

Under the terms of its loan facility agreements, the subsidiaries are required to enter into rental rate swap agreements to hedge their rental cost exposure against fluctuations in rental rates (note 40).

(iv) Abu Dhabi National Energy Company PJSCEffectiverental rate% Maturity

2014AED million

2013AED million

Non-currentIslamic Sukuk loan 5.3% 2020 679 725

In November 2011, TAQA established a MYR 3.5 billion (AED 3.7 billion) Sukuk programme. During the year ended 31 December 2012, an amount of MYR 650 million (AED 790 million) was issued under the programme. The Group has entered into a cross currency rate swap arrangement to hedge the Group’s exposure against fluctuation in currency rates. The 10 year Sukuk was raised with a profit of 4.65% with a full swapped rate to US Dollars of 5.3% (note 40.1(ii)).

The loan is stated net of discount and transaction costs incurred in connection with the loan arrangements, amounting to AED 3 million (2013: AED 5 million), which are amortised to the consolidated income statement over the repayment period of the notes using effective interest rate method.



32 Asset retirement obligationsAs part of the land lease agreements between ADWEA and the Company’s domestic subsidiaries, the subsidiaries have a legal obligation to remove the power and water desalination plants at the end of the plants’ useful lives, or before if the subsidiaries became unable to continue their operations to that date, and to restore the land. The subsidiaries shall at their sole cost and expense dismantle, demobilise, safeguard and transport the assets, eliminate soil and ground water contamination, fill all excavation and return the surface to grade of the designated areas. The fair value of the ARO liability has been calculated using an expected present value technique. This technique reflects assumptions such as costs, plant useful life, inflation and profit margin that third parties would consider to assume the settlement of the obligation.

In addition, the Company’s foreign subsidiaries involved in the oil and gas sector make provision for the future cost of decommissioning oil and gas properties and facilities at the end of their economic lives. The economic life and the timing of the decommissioning liabilities are dependent on Government legislation, commodity prices and the future production profiles of the respective assets. In addition, the costs of decommissioning are subject to inflationary/ deflationary pressures in the cost of third party service provision.

2014AED million

2013AED million

ARO liability at 1 January 12,316 9,201On business combinations – 2,082Utilised during the year (132) (170)Provided during the year 12 80Disposal of assets (4) (6)Accretion expense (note 9.1) 667 554Revision in estimated cash flows 465 668Exchange adjustment (86) (93)

ARO liability at 31 December 13,238 12,316

Disclosed in the consolidated statement of financial position as follows:Current liabilities (note 35) 95 120Non-current liabilities 13,143 12,196

13,238 12,316

33 Advances and loans from related parties2014

AED million2013

AED million

Loans from related parties (note (i)) 40 38Advances from related parties 245 71

285 109

(i) Movements in the loan balances during the year were as follows:

2014AED million

2013AED million

Balance at 1 January 38 36Notional interest expense (note 9.1) 2 2

Balance at 31 December 40 38

Loans from related parties as at 31 December 2014 and 31 December 2013 are from the Abu Dhabi Power Corporation (ADPC). During 2005, the Company’s subsidiary was granted a loan amounting to AED 70 million by a fellow subsidiary of the Company. The

loan is interest free and unsecured and is due for payment in full in June 2025. On inception, the Company’s management measured the loan at its fair value of AED 24 million. The difference of AED 46 million between the loan amount of AED 70 million and its fair value has been treated as an equity contribution from the ultimate holding company.

34 Other liabilities2014

AED million2013

AED million

Provisions recognised on business combinations (note i) 14 81Negative fair value of derivatives – interest rate swaps (note 40.1) 4,300 3,801Negative fair value of derivatives – forward exchange contracts (note 40.1) 57 33Negative fair value of derivatives – cross currency interest rate swaps (note 40.1) 333 166Employee benefits obligations 78 75Others 139 76

4,921 4,232

(i) Provisions recognised on business combinations relate mainly to certain onerous contracts in relation to market conditions recognised at fair value at the date of acquisition of Pioneer Canada Limited in 2007. The current portion of the provisions amounting to AED 81 million (2013: AED 93 million) is shown under accounts payable, accruals and other liabilities (note 35).

85


34 Other liabilitiesContinuedMovement in total provision recognised on business combinations during the year is as follows:

2014AED million

2013AED million

Balance at 1 January 174 284Release to consolidated income statement during the year (84) (116)Accretion expense 15 22Exchange adjustment (10) (16)

Balance at 31 December 95 174

35 Accounts payable, accruals and other liabilities2014

AED million2013

AED million

Trade payables 864 1,030Payable to joint venture partners 172 228Accrued interest expenses 962 1,021Accrual for operating costs 1,263 1,766Payable for capital expenditure 1,074 1,533Provisions recognised on business combinations (note 34) 81 93Negative fair value of derivatives – interest rate swaps (note 40.1) 813 897Negative fair value of derivatives – cross currency interest rate swaps (note 40.1) 8 –Negative fair value of derivatives – forward exchange contracts (note 40.1) 18 7Negative fair value of derivatives – futures and forward contracts (note 40.1) 197 –Asset retirement obligations (note 32) 95 120Dividends payable to non-controlling interests 50 28Crude stock overlift 22 139Others 804 1,108

6,423 7,970

Terms and conditions of the above liabilities:

• Trade payables are non-interest bearing and are normally settled between 30 to 60 day terms.

• Payables to joint venture partners are non-interest bearing and have an average term of 60 days.

• Interest payable is normally settled throughout the financial year in accordance with the terms of the loans.

36 Amounts due to ADWEA and other related parties2014

AED million2013

AED million

Loan due to ADWEA (note 25.2) – 237Amounts due to fellow subsidiaries – ADWEC & ADPC 29 79Others 68 137

97 453

37 Commitments and contingencies(i) Capital expenditure commitmentsThe authorised capital expenditure contracted for at 31 December 2014 but not provided for amounted to AED 3,603 million (2013: AED 4,830 million).

(ii) Operating lease commitmentsGroup as a lessor:Future capacity payments to be received by the Group under power and water purchase agreements (“PWPA”) based on projected plant availability as at 31 December are as follows:

2014AED million

2013AED million

Within one year 5,753 5,722After one year but not more than five years 21,915 22,132More than five years 55,281 60,772

82,949 88,626



Group as a lessee:Future minimum payments under non-cancellable operating leases as at 31 December are as follows:

2014AED million

2013AED million

Within one year 345 423After one year but not more than five years 1,172 1,152More than five years 774 1,064

2,291 2,639

Joint Venture: The Group’s joint venture has future minimum rentals payable under a non-cancellable operating lease as at 31 December 2014 amounting to AED 1,708 million (31 December 2013: AED 1,790 million), of which the Group’s share is AED 854 million (31 December 2013: AED 895 million).

Associates:Sohar Aluminium Company LLC, one of the Group’s associates, has future minimum rentals payable under a non-cancellable operating lease as at 31 December 2014 amounting to AED 1,460 million (2013: AED 1,498 million), of which the Group’s share is AED 584 million (2013: AED 599 million).

(iii) Other commitmentsa) TAQA had entered into an agreement with an infrastructure fund managed by a third party and had committed to invest US$200

million (AED 735 million) in the fund over a period of five years. During the year ended 31 December 2014, the Group sold its investment in the infrastructure fund (see note 14) and settled its commitments.

b) As at the reporting date TAQA North has entered into contractual commitments, mainly pipeline usage and commitments, under which they are committed to spend AED 442 million prior to 31 December 2016 (31 December 2013: AED 348 million).

(iv) Contingenciesa) As a result of acquisitions made in prior periods, there are contingent liabilities arising from (a) tax assessments or proposed

assessments and (b) certain other disputes, all of which are being contested. Pursuant to the Purchase and Sale Agreements between TAQA and the sellers, the sellers have provided TAQA and its subsidiaries with indemnity obligations with respect to such contingent liabilities for the periods prior to date of the respective acquisitions.

b) TAQA GEN X LLC (“GENX”) is the owner by assignment of a Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement dated as of 17 September 1999 (the “Tolling Agreement”) by and between AES Red Oak, L.L.C. (“AES”) and Williams Energy Marketing & Trading Company, as well as other ancillary rights and agreements. GENX entered into an Energy Management Agreement (“EMA”) and an International Swap & Derivatives Master Agreement (“ISDA”) both dated 28 December 2010 with Morgan Stanley Capital Group Inc. to manage the energy products under the Tolling Agreement and ancillary rights and agreements. The Group guaranteed the obligations of GENX to Morgan Stanley Capital Group Inc. under the EMA and ISDA agreement. Payments under this guarantee shall not exceed US$100 million (AED 367 million) (31 December 2013: US$100 million) over the life of the EMA. No payments have been made to date (31 December 2013: nil).

c) TAQA Bratani Ltd. has entered into decommissioning deeds for certain North Sea Assets acquired by it, pursuant to which it may be required to provide financial security to the former owners of the assets, either by means of (a) placing monies in trust or procuring the issuance of letters of credit in an amount equal to its share of the net decommissioning costs of the subject fields plus an allowance for uncertainty; or (b) procuring a guarantee from a holding company or affiliate which satisfies a minimum credit rating threshold; or (c) providing security in such other form as may be agreed by parties to the deeds. TAQA Bratani Ltd. initially provided TAQA’s (“parent company”) guarantee, but in the interim the parent company’s credit rating was reduced to below the minimum credit rating specified in the deeds. The Group has previously been in good faith discussions with the other parties to the deeds regarding whether and to what extent the Group will be required to replace or supplement some or all of the parent guarantee with other acceptable credit support but no outcomes were concluded, and the parent guarantee remains in place. However, since that time, the U.K. Government has introduced a legislative framework that is designed to allow security arrangements for North Sea decommissioning obligations to be made on a post-tax basis, to the extent parties to the decommissioning deeds adopt modified decommissioning deeds, and the Group would expect that if or when the discussions with counter-parties resume, it would most likely be on that basis. If the Group was required to replace the parent guarantee in its entirety, the amount it would have to procure through the issuance of letters of credit or other collateral, could be in excess of US$1.0 billion. In respect of certain other North Sea Assets acquired by members of the Group, the Group is able to meet the security arrangements for decommissioning obligations by way of provision of a parent company guarantee, so long as the Group continues in majority – ownership of the Government of Abu Dhabi.

d) In addition to the above, there are certain guarantees and letters of credit arising in the ordinary course of business to which TAQA and certain other subsidiaries are parties. These do not create any material additional obligations other than what is disclosed in the statement of financial position as at period end.

87


38 Related party transactionsAs stated in note 1 to the financial statements, the Group is a subsidiary of ADWEA, which is wholly owned by the Government of Abu Dhabi and as such the Group is a government related entity as defined by IAS 24 Amended. The Group is therefore exempt from disclosing certain information relating to transactions and balances with entities related to the same government.

Collectively but not individually significant transactionsAll domestic power and water production is acquired by ADWEC (a fellow subsidiary of the Group) under long term PWPAs. Natural gas fuel is supplied by ADWEC to the domestic subsidiaries at no cost in accordance with the terms of the PWPAs.

The following table provides a summary of significant related party transactions included in the consolidated income statement during the year:

2014AED million

2013AED million

Fellow subsidiary (Abu Dhabi Water and Electricity Company):Sale of electricity and water 6,893 6,846Fuel revenue (note 4.3) 28 17Other revenue 62 320Others:Interest income on loan to associate (note 9.2) 4 5Interest expense on loan from ADWEA (note 9.1) (21) (21)Notional interest expense on loan from ADWEA and ADPC (note 9.1) (2) (2)Insurance claim from ADNIC 60 –Government entities:Licensing fees 14 12Fuel expense 13 15Finance cost 53 57

Balances with related parties and governmental agenciesBalances with related parties that are disclosed in the consolidated statement of financial position as follows:

2014AED million

2013AED million

Non-current assets:Advance and loans to associates (note 19) 398 398Current assets:Advance and loans to associates (note 19) 467 570Accounts receivable: Amounts due from fellow subsidiaries (note 22) 1,308 1,161Loan to an associate (note 19) 8 13Bank balance with government owned bank 308 326Short-term deposit held with government owned bank 90 70Non-current liabilities:Loan from a fellow subsidiary - ADPC (note 33) 40 38Advances from a fellow subsidiary (note 33) 245 71Bank loans with government owned bank 154 178Current liabilities:Amounts due to ADWEA and other related parties (note 36) 68 137Loan due to ADWEA (note 36) – 237Amounts due to fellow subsidiaries – ADWEC & ADPC (note 36) 29 79Overdraft with government owned bank 92 62

At 31 December, the Company had available undrawn bank facilities with government owned entities: 963 636

Other transactionsDuring the year, TAQA entered into an agreement with a related party whereby, at the request of TAQA, the related party agrees to offer to purchase certain oil and gas assets of the segment at an agreed price.

Compensation of key management personnelFor certain subsidiaries, key management personnel are provided by operation and maintenance companies under contractual agreements with the subsidiaries (note 16).

The remuneration of senior key management personnel of the Group during the year was as follows:

2014AED million

2013AED million

Short-term benefits 28 41Post-employment benefits 2 3

30 44



39 SubsidiariesThe consolidated financial statements include the financial statements of TAQA and all its subsidiaries. The Group’s major operating subsidiaries are listed below:

Percentage holding

Country of incorporation31 December

201431 December

2013

Domestic SubsidiariesEmirates CMS Power Company PJSC (ECPC) UAE 54% 54%Gulf Total Tractebel Power Company PJSC (GTTPC) UAE 54% 54%Arabian Power Company PJSC (APC) UAE 54% 54%Shuweihat CMS International Power Company PJSC (SCIPCO) UAE 54% 54%Taweelah Asia Power Company PJSC (TAPCO) UAE 54% 54%Emirates Semb Corp Water and Power Company PJSC (ESWPC) UAE 54% 54%Fujairah Asia Power Company PJSC (FAPCO) UAE 54% 54%Ruwais Power Company PJSC (RPC) UAE 54% 54%Taweelah Shared Facilities Company LLC (TSFC)* UAE 48% 48%Shuweihat Shared Facilities Company LLC (SSFC)* UAE 38% 38%

Foreign SubsidiariesTAQA New World, Inc. Delaware, USA 100% 100%TAQA GEN XLP Delaware, USA 85% 85%TAQA Bratani Limited UK 100% 100%TAQA International B.V. Netherlands 100% 100%TAQA Energy B.V. Netherlands 100% 100%TAQA North Ltd. Canada 100% 100%TAQA Atrush B.V. Netherlands 100% 100%Jorf Lasfar Energy Company, S.A Morocco 85.79% 85.79%Jorf Lasfar Energy Company 5&6 S.A. Morocco 90.62% 90.62%Takoradi International Company Cayman Islands 90% 90%TAQA Neyveli Power Company Private Ltd. India 100% 100%Himachal Sorang Power Limited India 100% 100%TAQA Insurance Limited Guernsey 100% 100%

* These entities are treated as subsidiaries even though TAQA’s holding in these entities are below 50% due to the Group’s control through the direct holding in these subsidiaries by two of the Group’s subsidiaries being above 50%, thus enabling TAQA to have the ability to exercise control in the Board.

Further details on the main subsidiaries are as follows:

Domestic subsidiariesEmirates CMS Power Company PJSC (ECPC)Emirates CMS Power Company PJSC (”ECPC”) is a private joint stock company registered and incorporated in the United Arab Emirates (“UAE”) and is engaged in the generation of electricity and the production of desalinated water for supply into the Abu Dhabi grid. ECPC is 60% owned by Emirates Power Company PJSC, a 90% owned subsidiary of Abu Dhabi National Energy Company PJSC (“TAQA”) and 40% owned by CMS Generation Taweelah Limited.

ECPC has a management operation and maintenance agreement with Taweelah A2 Operating Company whereby the latter has undertaken to manage the day-to-day operations and maintain ECPC’s plant. The ECPC has entered into a power and water purchase agreement (“PWPA”) with Abu Dhabi Water and Electricity Company (“ADWEC”), a related party (a wholly-owned subsidiary of ADWEA). Under the PWPA, ECPC undertakes to make available, and ADWEC undertakes to purchase, the entire net capacity of the plant until October 2021 in accordance with various agreed terms and conditions. The output payments cover variable operation and maintenance costs and fuel efficiency bonuses or penalty for actual output. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by ECPC at the end of the PWPA term.

Gulf Total Tractebel Power Company PJSC (GTTPC)Gulf Total Tractebel Power Company PJSC (“GTTPC”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water for supply into the Abu Dhabi grid. GTTPC is 60% owned by Gulf Power Company, a 90% owned subsidiary of TAQA and 40% owned by Total Tractebel Emirates Power Company.

GTTPC has a management operation and maintenance agreement with Total Tractebel Emirates O & M Company, whereby the latter has undertaken to manage the day-to-day operations and maintain the GTTPC plant. Further, GTTPC has entered into a power and water purchase agreement with ADWEC. Under the agreement, GTTPC undertakes to make available, and ADWEC undertakes to purchase, the available net capacity of the plant until May 2023 in accordance with various agreed terms and conditions.

The output payments cover variable operation and maintenance costs and fuel efficiency bonuses or penalty for actual output. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by GTTPC at the end of the PWPA term.

Following completion of the A10 extension project, the PWPA was amended resulting in an extension to the term by an additional six years until April 2029. The output payments cover variable operation and maintenance costs and fuel efficiency bonuses or penalty for actual output. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant and its A10 extension will be retained by the Company at the end of the PWPA term.

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39 SubsidiariesContinued Domestic subsidiaries ContinuedArabian Power Company PJSC (APC)Arabian Power Company PJSC (“APC”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water for supply into the Abu Dhabi grid. APC is 60% owned by Arabian United Power Company, a 90% owned subsidiary of TAQA and 40% owned by ITM Investment Company Limited.

APC has a management operation and maintenance agreement with ITM O & M Company Limited, whereby the latter has undertaken to manage the day-to-day operations and maintain APC’s plant. Further, APC has entered into a PWPA with ADWEC. Under the PWPA, APC undertakes to make available, and ADWEC undertakes to purchase, the available net capacity of the plant until July 2027 in accordance with various agreed terms and conditions. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by APC at the end of the PWPA term.

Shuweihat CMS International Power Company PJSC (SCIPCO)Shuweihat CMS International Power Company PJSC (“SCIPCO”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water for supply into the Abu Dhabi grid. SCIPCO is 60% owned by Al Shuweihat Power Company, a 90% subsidiary of TAQA and 40% owned by Shuweihat Limited.

SCIPCO has a management operation and maintenance agreement with Shuweihat O & M Limited Partnership, whereby the latter has undertaken to manage the day-to-day operations and maintain SCIPCO’s plant. Further, SCIPCO has entered into a PWPA with ADWEC. Under the agreement, SCIPCO undertakes to make available, and ADWEC undertakes to purchase, the available net capacity of the plant until June 2025 in accordance with various agreed terms and conditions. The output payments cover variable operation and maintenance costs and fuel efficiency bonuses or penalty for actual output. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by SCIPCO at the end of the PWPA term.

Taweelah Asia Power Company PJSC (TAPCO)Taweelah Asia Power Company PJSC (“TAPCO”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water for supply into the Abu Dhabi grid. TAPCO is 60% owned by Taweelah United Power Company, a 90% subsidiary of TAQA and 40% owned by Asia Gulf Power Holding Company Limited.

TAPCO has a management operation and maintenance agreement with Asia Gulf Power Service Company Limited, whereby the latter has undertaken to manage the day-to-day operations and maintain TAPCO’s plant. Further, TAPCO has entered into a PWPA with ADWEC. Under the PWPA, TAPCO undertakes to make available, and ADWEC undertakes to purchase, the available net capacity of the plant until March 2028 in accordance with various agreed terms and conditions. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by TAPCO at the end of the PWPA term.

Emirates SembCorp Water and Power Company PJSC (ESWPC)Emirates SembCorp Water & Power Company PJSC (“ESWPC”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water. ESWPC is 60% owned by Union Power Holding Company, a 90% subsidiary of TAQA and 40% owned by SembCorp Gulf Holding Company Limited.

ESWPC has a management operation and maintenance agreement with SembCorp Gulf O & M Company Limited, whereby the latter has undertaken to manage the day-to-day operations and maintain ESWPC’s plant. Further, ESWPC has entered into a PWPA with ADWEC. Under the PWPA, ESWPC undertakes to make available, and ADWEC undertakes to purchase, the available net capacity of the plant until January 2029 in accordance with various agreed terms and conditions. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by ESWPC at the end of the PWPA term.

Fujairah Asia Power Company PJSC (FAPCO)Fujairah Asia Power Company PJSC (“FAPCO”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water for supply into the UAE grid. FAPCO is 60% owned by Fujairah Water and Electricity Company, a 90% subsidiary of TAQA and 40% owned by Fujairah F2 CV.

During the year, the principal activities of the Company were to develop, finance, design and construct a power generation and desalination plant (the “Plant”). In 2007, Fujairah F2 CV entered into a turnkey agreement (“EPC”) with third party contractors for the engineering, procurement and construction of the Plant in Fujairah. This agreement was subsequently novated to the Company.

FAPCO has a management operation and maintenance agreement with Fujairah F2 O & M Company Ltd, whereby the latter has undertaken to manage the day-to-day operations and maintain the Company’s plant until 2030. Further, FAPCO has a gas turbine long-term service agreement (“LTSA”) with Alstrom O&M Limited and Alstrom Power Service (Arabia) until 2026. FAPCO has entered into a power and water purchase agreement (“PWPA”) with Abu Dhabi Water and Electricity Company (“ADWEC”), a related party and a wholly-owned subsidiary of ADWEA. Under the PWPA, the Company undertakes to make available, and ADWEC undertakes to purchase, the entire net capacity of the plant until July 2030 in accordance with various agreed terms and conditions. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by FAPCO at the end of the PWPA term.

Ruwais Power Company PJSC (RPC)Ruwais Power Company PJSC (“RPC”) is a private joint stock company registered and incorporated in the UAE and is engaged in the generation of electricity and the production of desalinated water. RPC is 60% owned by Ruwais Power Holding Company, a 90%



subsidiary of TAQA and 40% owned by Shuweihat 2 Holding Company Limited.During the year, the principal activities of RPC were to develop, finance, design and construct a power generation and desalination

plant (“the Plant”). In 2008, RPC entered into a turnkey agreement with third party contractors for the engineering, procurement and construction of the Plant in Ruwais for an amount of US$2.2 billion.

RPC has a management operation and maintenance agreement with S2 Operation and Maintenance Company W.L.L, whereby the latter has undertaken to manage the day-to-day operations and maintain the Company’s plant. In July 2008, RPC has entered into a power and water purchase agreement (“PWPA”) with Abu Dhabi Water and Electricity Company (“ADWEC”), a related party, (a wholly-owned subsidiary of ADWEA). Under the PWPA, RPC undertakes to make available, and ADWEC undertakes to purchase, the available net capacity of the plant until August 2031 in accordance with various agreed terms and conditions. Natural gas fuel is supplied by ADWEC at no cost. The ownership of the plant will be retained by RPC at the end of the PWPA term.

Foreign operating subsidiariesTAQA GEN X LPTAQA GEN X limited partnership was incorporated during 2008 and is a 85% subsidiary of TAQA. During the fourth quarter of 2008, TAQA GEN X acquired 100% holding in BE Red Oak holding LLC, a company which holds a contractual interest in a tolling agreement for a combined cycle generation facility with a design electric generation capacity of approximately 764 MW located in Sayreville, New Jersey which facility is owned by AES Red Oak. The Tolling Agreement is defined as certain Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement dated 17 September 1999 between BE Red Oak and AES Red Oak, as amended. The acquisition was completed on 31 December 2008.

TAQA Bratani Limited and TAQA Bratani LNS LimitedTAQA Bratani Limited and TAQA Bratani LNS Limited were incorporated in 2006 to oversee TAQA’s investments in the UK. In 2006, TAQA Bratani Limited and TAQA Bratani LNS Limited acquired the working interests of Talisman Energy Inc. in the Brae area of the UKCS (UK Continental Shelf). The interests in the Brae asset area includes part ownership of platforms, pipelines and offshore facilities, together with a large number of contracts which were entered into as part of the acquisition (mainly processing, tariffing and supply contracts). Control was transferred to the subsidiary on 31 December 2007. On 1 December 2008, TAQA Bratani Limited acquired a business from the UK subsidiaries of Shell UK Limited and Esso Exploration and Production UK Limited comprising a package of upstream assets in the Northern North Sea together with related infrastructure, personnel and processes.

TAQA Energy B.V.In January 2007, TAQA, through its wholly owned subsidiary TAQA Europa B.V., acquired BP Nederland Energie B.V. (subsequently renamed TAQA Energy B.V.) from Amoco Netherlands Petroleum Company (“Amoco”). TAQA Energy is involved in the exploration, production and transportation of oil and natural gas in the Netherlands. TAQA Energy is also involved in the peak gas business by commissioning the first peak shaver in the Netherlands, the Alkmaar Piek Gas Installatie (“PGI”). In October 2009, TAQA Energy completed the acquisition of all issued and outstanding interest in DSM Energie Holding B.V. (“DSM Energy”) from the Netherlands based Royal DSM N.V. TAQA Energy took control of the company which includes new and existing licences in the North Sea as well as 40% interest in Noordgastransport B.V.

TAQA NORTH Ltd.TAQA NORTH, formerly Northrock Resources Limited (“Northrock”) is a Calgary-based oil and gas exploration company with operations in Alberta, British Columbia, Saskatchewan, Ontario and the Northwest Territories in Canada and in Montana, North Dakota and Wyoming in the United States. Northrock was acquired by TAQA in August 2007 from Pogo Producing Company and amalgamated with TAQA NORTH. TAQA NORTH subsequently entered into agreements to acquire Pioneer Canada Ltd. (“Pioneer”), a subsidiary of US-based Pioneer Natural Resources Company, and Calgary-based PrimeWest Energy Trust (“PrimeWest”). The former transaction closed on 27 November 2007 and the latter on 16 January 2008.

Jorf Lasfar Energy Company, SCA (JLEC) and Jorf Lasfar Energy Company 5&6 S.A. (JLEC 5&6)JLEC was incorporated in Morocco as a société en commandite par actions (which is similar to a limited partnership) in January 1997. Through affiliated companies, TAQA owns 100% of JLEC. JLEC was established to operate two existing power generation units at Jorf Lasfar, each having 330 MW gross capacity (“units 1 and 2”), and to construct and operate two units of 348 MW gross capacity each (“units 3 and 4”) at the same site.

Through the power purchase agreement (“PPA”), transfer of possession agreement and the construction and procurement agreement, JLEC acquired the right to design, construct, finance and commission units 3 and 4, operate all four units and sell all power generation capacity and net electricity production generated by these four units to Morocco’s state-owned “Office National de Electricite” (“ONE”) for a period of 30 years from financial close of the Jorf Lasfar project, which occurred in September 1997.

ONE retained legal title to units 1 and 2 and acquired legal title to each of units 3 and 4 as they were constructed. JLEC operates and possesses all four units and ancillary infrastructure comprising the Jorf Lasfar power station through a right of quiet enjoyment (droit de jouissance), a concept recognised under Moroccan law which transfers possession together with the right to use, enjoy and profit from the assets transferred.

As of May 2007, the operating company, JLEC, became an indirect wholly owned subsidiary of TAQA when TAQA acquired a 50% interest in the operating company as part of the acquisition of TAQA Generation, and acquired the remaining 50% interest from an affiliate of ABB Ltd.

In December of 2010, JLEC formed a subsidiary called Jorf Lasfar Energy Company 5&6 S.A., which was established to construct, own, and operate two units of approximately 350 MW gross capacity each (“units 5 and 6”) adjacent to the existing JLEC project.

91


39 SubsidiariesContinuedForeign operating subsidiaries Continued Takoradi International Company (TICO)TICO is the Ghana Branch of a Cayman Islands limited liability company. The Company is authorised to develop, design, finance, construct, commission, complete, own, operate, and maintain a power generation plant to be located adjacent to the existing power station in Aboadze, near Takoradi, within the TTPP complex. As of May 2007, TAQA Generation, a wholly owned subsidiary of TAQA acquired a 90% interest in TICO.

TAQA Neyveli Power Company Private Ltd. (TNPCPL)TNPCPL was incorporated on 17 November 1993, principally for the purposes of owning and operating the 250 MW lignite thermal power plant facility located in Neyveli, Tamil Nadu, Republic of India. TNPCPL sells the entire capacity of the power plant to TNEB, the local state government owned utility, under a 30-year power purchase agreement. The plant was developed and constructed by SCECPL and commenced commercial operations in December 2002. The plant is operated by CMS (India) Operation and Maintenance Company Private Limited under a 30-year operation and maintenance agreement.

As of May 2007, the operating company, TNPCPL, became an indirect wholly owned subsidiary of TAQA when TAQA acquired a 50% interest in TNPCPL as part of the acquisition of TAQA Generation, and acquired the remaining 50% interest in May 2007 from an affiliate of ABB Ltd.

TAQA Atrush B.VTAQA Atrush B.V. was incorporated in 2012 to acquire a 53.2% interest in the Atrush oil block in the Kurdistan region of Iraq from General Exploration Partners Inc, an affiliate of Aspect Energy International LLC. The acquisition completed in December 2012 and TAQA Atrush B.V. also became the operator. The Atrush oil block is currently in the exploration phase with a field development plan being worked towards following commercial discovery in November 2012.

Himachal Sorang Power Limited (HSPL)TAQA acquired HSPL in December 2012, the developer and operator of a 100 megawatt (MW) hydroelectric plant in the northern Indian state of Himachal Pradesh. Construction of the Sorang hydroelectric project is still in progress and the plant is expected to begin operations in 2014. It will be powered by the Sorang Khad, a river originating in the Himalayas, and will supply electricity to the northern states of India, a region currently facing power shortages. It uses run-of-the-river technology to convert the river’s natural water flow to electricity, eliminating the need for a reservoir.

Other subsidiariesO&M CompaniesAs part of the acquisition of Jorf Lasfar, SCECPL and TICO as described above, TAQA also acquired the related operating and maintenance companies.

Taweelah Shared Facilities Company LLC (TSFC)TAQA acquired a controlling interest in Taweelah Shared Facilities Company LLC through its subsidiaries Taweelah Asia Power Company PJSC, Emirates CMS Power Company PJSC and Gulf Total Tractebel Power Company PJSC.TSFC is a closely held private company incorporated in United Arab Emirates which maintains shared utility facilities in Al Taweelah complex for the supply and discharge of sea water and provides other related services to TAQA subsidiaries.

Shuweihat Shared Facilities Company LLC (SSFC)TAQA acquired a controlling interest in Shuweihat Shared Facilities Company LLC through its subsidiaries Ruwais Power Company PJSC and Shuweihat CMS International Power Company PJSC.SSFC is a closely held private company incorporated in United Arab Emirates which maintains shared utility facilities in Shuweihat complex for the supply and discharge of sea water and provides other related services to TAQA subsidiaries.

TAQA International BVThe subsidiary was created in 2006 to oversee certain investments made by TAQA. As of 31 December 2009, the Company held investments in TAQA Energy, TAQA North, TAQA Bratani, Jorf Lasfar 5&6, TAQA Neyveli Power Company, TAQA Atrush B.V. and TAQA Financial Services.

TAQA New World – Delaware and Aglauros Inc.The subsidiary was created in 2006 to oversee TAQA’s investments in United States of America.

TAQA Financial ServicesThe subsidiary was created in 2008 for the purpose of centralising the Group’s treasury operations. The primary goal of TAQA Financial Services (“TFS”) is to act as an in-house bank through which all of the Group’s entities direct their cash flow.



TAQA Insurance LimitedThe subsidiary was created in 2013 for the purpose of centralising the Group’s insurance operations. The primary goal of TAQA Insurance Limited (“TIL”) is to act as an in-house insurance broker for the all of the Group’s entities.

Al Wahda Investment Company LLC Al Wahda Investment Company LLC (“AWIC”) is a limited liability company registered and incorporated in the UAE and is engaged in investment activities.

40 Financial instruments40.1 Hedging activities

Current2014

AED million

Non-current2014

AED million

Current2013

AED million

Non-current2013

AED million

Cash flow hedgesAssetsInterest rate swaps (notes 20 and 22) – – 41 115Forward foreign exchange contracts (notes 20 and 22) 5 31 20 75

5 31 61 190

LiabilitiesCross currency interest rate swap (notes 34 and 35) 8 333 – 166Interest rate swaps (notes 34 and 35) 813 4,300 897 3,801Forward foreign exchange contracts (notes 34 and 35) 18 57 7 33

839 4,690 904 4,000

Fair value hedgesAssetsFutures and forward contracts (note 22) – – 225 –

LiabilitiesFutures and forward contracts (note 35) 197 – – –

(i) Interest Rate Swaps – Cash flow hedgeIn order to reduce their exposure to interest rate fluctuations on variable interest bearing loans and borrowings (note 30) and Islamic loans (note 31) certain subsidiaries have entered into interest rate swap arrangements with counterparty banks for a notional amount that matches the outstanding interest bearing loans and borrowings and Islamic loans. The derivative instruments were designated as cash flow hedges. The following table summarises certain information relating to the derivatives for each subsidiary as of 31 December 2014 and 31 December 2013:

Notional amount Derivative liabilitiesDerivative

assets Fix leg on instrument Fix leg on instrument

Subsidiary2014

AED million2013

AED million2014

AED million2013

AED million2013

AED million 2014 2013

ECPC 729 992 66 98 – 6.31% to 6.33% 6.31% to 6.33%GTTPC 3,066 3,193 259 263 126 2.89% to 5.2 % 2.63% to 6.99%SCIPCO 2,594 2,873 255 387 – 5.04% to 6.354% 5.04% to 6.35%APC 2,258 2,447 307 317 – 4.6% to 4.89% 4.6% to 4.89%TAPCO 4,235 6,049 639 751 – 5.28% 2.81% to 5.28%ESWPC 3,786 3,944 631 682 – 3.62% to 5.85% 3.0% to 5.85% FAPCO 5,442 5,632 1,511 1,217 – 5.65% to 5.72% 5.65% to 5.72%RPC 5,127 5,282 1,293 934 – 4.62% to 5.4% 3.86% to 5.4%JLEC 5&6 2,553 2,839 152 2 30 1.92% to 2.12% 1.92% to 2.12%TICO 932 433 – 47 – 2.2% to 2.31% 2.2% to 2.31%

30,722 33,684 5,113 4,698 156

(ii(a)) Cross currency Swaps – Cash flow hedgesDuring 2012, the Group entered into a cross currency rate swap agreement to hedge the Group’s exposure on the Malaysian Ringgit Sukuk issued during the year (note 31 (iv)). Under the terms of the cross currency rate swap, TAQA is required to pay a fixed rate of 5.3% per annum on an initial exchange amount of US$215 million and receive a fixed rate of 4.65% per annum on an amount of MYR 650 million. The derivative instrument had a negative fair value of AED 229 million at 31 December 2014 (2013: negative fair value AED 166 million), which was included within other liabilities in the consolidated financial position.

(ii(b)) Cross Currency Interest Rate Swaps – Cash flow hedgesIn April 2010, the Group entered into interest rate swap agreements with a group of banks to hedge the changes in fair value of US$1 billion Global Medium Term Notes (AED 3.7 billion) attributable to movements in the LIBOR rate component. Under the swap agreement, the Group receives a fixed rate of interest of 6.6% and pays a variable rate equal to LIBOR plus margin on a notional amount. The swap has been designated as cash flow hedge.

93


40 Financial instrumentsContinued40.1 Hedging activitiesContinued(ii(b)) Cross Currency Interest Rate Swaps – Cash flow hedgesDuring April 2014, the Group entered into a cross currency interest rate swap agreement with Mitsubishi UFJ Securities International plc to hedge the Group’s exposure on the Samurai term loan facility issued during the period (note 30 (i)). Under the terms of the cross currency interest rate swap, TAQA is required to pay a variable rate equal to LIBOR plus margin on an initial exchange amount of US$200 million and receive a variable rate equal to JPY LIBOR plus margin on an amount of JPY 20 billion. The swap has been designated as a cash flow hedge and the effective portion of gain and losses is recorded in equity. The derivative instrument had a negative fair value of AED 112 million as at 31 December 2014, which is included within other non-current liabilities in the consolidated statement of financial position.

(iii) Forward Foreign Exchange ContractsShuweihat CMS International Power Company PJSC (SCIPCO)SCIPCO uses forward foreign exchange contracts to hedge its risk associated with foreign currency fluctuations relating to scheduled maintenance cost payments to an overseas supplier. The outstanding forward foreign exchange commitment at 31 December 2014 amounted to AED 184 million (2013: AED 257 million).

The derivative instruments which are entered into for the purpose of cash flow hedge had a negative fair value of AED 10 million at 31 December 2014 (2013: positive fair value of AED 17 million). An amount of AED 6 million representing the non-current derivative liability (2013: AED 12 million representing the non-current derivative asset), has been disclosed in the statement of financial position and the current portion amounting to AED 4 million is included within accruals and other liabilities (note 35) (2013: AED 5 million under accounts receivables and prepayments and (note 22)).

Fujairah Asia Power Company PJSC (FAPCO)FAPCO uses forward foreign exchange contracts to hedge its risk associated with foreign currency fluctuations relating to scheduled maintenance cost payments to an overseas supplier. The notional amount outstanding at 31 December 2014 was AED 318 million (2013: AED 340 million).

The derivative instrument had a positive fair value of AED 36 million (2013: AED 78 million) as of 31 December 2014. An amount of AED 31 million (2013: AED 63 million), representing the non-current portion of the derivative asset has been included within other assets (note 20) and the current portion amounting to AED 5 million (2013: AED 15 million) is included within accounts receivable and prepayments (note 22).

Ruwais Power Company PJSC (RPC)RPC uses forward foreign exchange contracts to hedge its risk associated with foreign currency fluctuations relating to scheduled maintenance cost payments to an overseas supplier. The notional amount outstanding at 31 December 2014 was AED 330 million (2013: AED 392 million).

The derivative instrument had a negative fair value of AED 65 million (2013: AED 40 million) as of 31 December 2014. An amount of AED 51 million (2013: AED 33 million), representing the non-current portion of the derivative liability has been included within other liabilities (note 34) and the current portion amounting to AED 14 million (2013: AED 7 million) is included within accounts payable, accruals and other liabilities (note 35).

(iv) Forward Sales Transactions – Cash flow hedgesTAQA NorthThe Board of Directors of TAQA approved a commodity hedging policy in the summer of 2010, which authorised management to enter into financial derivative contracts to manage the Group’s exposure to commodity price volatility. TAQA North, a subsidiary of TAQA, developed and enacted a risk management strategy regarding commodity price risk and implemented a hedging programme using zero cost collar contracts to mitigate the risk of crude oil and natural gas price volatility. These commodity derivatives are designated as cash flow hedges; the effective portion of gain and losses being initially recorded in other comprehensive income and deferred in equity before being transferred to the income statement when the hedged transaction affects the income statement or the forecast transaction is no longer highly probable.

Effectiveness is assessed only during those periods in which there is a change in intrinsic value of the hedging instrument. Changes in the time value of the options are excluded from the assessment of effectiveness and together with any ineffective portion of gains and losses are recognised directly in the consolidated income statement in each reporting period.

During January 2014, TAQA North entered into a series of derivative financial contracts to mitigate the risk of natural gas price volatility. There were no cash premiums paid on any of the contracts and the counterparties are major Canadian banks. There was no outstanding commodity hedges as at 31 December 2014. The net realised and unrealised losses recognised in the consolidated income statement relating to such instruments is US$22 million (AED 80 million) for the year ended 31 December 2014 (2013: AED 4 million).



40.2 Hedging activities – Fair Value hedges(v) OtherTAQA GEN X LLC, a subsidiary of TAQA utilises derivative instruments, which include futures and forwards as a hedging strategy to manage the exposure in the fair value of the underlying Tolling Agreement. Forward and future transactions are contracts for delayed delivery of commodity instruments in which the counterpart agrees to make or take delivery at a specified price.

As at 31 December 2014, the net fair value of exchange-traded derivative instruments was AED 197 million shown under other non-current liabilities) (2013: gain of AED 225 million). The net realised and unrealised gains recognised in the consolidated income statement relating to such instruments are losses of AED 558 million for the year ended 31 December 2014 (2013: gains of AED 85 million).

As at 1 January 2014, following the early adoption of IFRS 9, TAQA GEN X LLC designated a new hedge relationship. The Tolling Agreement recognised as an intangible at acquisition was adjusted for the change in fair value for movements in the designated hedge risk in a fair value hedge relationship. The changes in the fair value of the Tolling Agreement attributable to the hedged risk (note 15), for the year ended 31 December 2014 was a gain of AED 249 million (2013: loss of AED 105 million) which was recognised in the consolidated income statement.

During the year ended 31 December 2013, TAQA GEN X LLC terminated hedge accounting for the changes in fair value of the underlying Tolling Agreement as a result of hedge ineffectiveness. The accumulated adjustment in fair value of the Tolling Contract since the inception of the accounting hedge designation totalled AED 302 million which will be amortised on a straight-line basis over the remaining useful life of the Tolling Agreement, until 2022.

40.3 Fair valuesThe fair values of the financial instruments of the Group are not materially different from their carrying values at the reporting date except for certain fixed interest borrowings and operating financial assets. Set out below is a comparison of the carrying amounts and fair values of fixed interest borrowings and operating financial assets:

Carrying amount Fair value

2014AED million

2013AED million

2014AED million

2013AED million

Operating financial assets 10,375 10,319 10,427 10,575Interest bearing loans and borrowings (note i) 31,711 32,568 35,142 35,206

(i) Interest bearing loans and borrowings relates to the Abu Dhabi National Energy Company Global Medium Term notes, Abu Dhabi National Energy Company bonds and the Ruwais Power Company bond. The fair value of operating financial assets is estimated by discounting the expected future cash flows using appropriate interest rates for assets with similar terms, credit risk and remaining maturities.The fair value of the interest bearing loans and borrowings is based on price quotations at the reporting date.

95


40 Financial instrumentsContinued40.4 Fair value hierarchyThe Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly

or indirectly.Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable

market data.

31 DecemberAED million

Level 1AED million

Level 2AED million

Level 3AED million

2014Financial assets measured at fair valueInvestment carried at FVOCI 2 – – 2Forward foreign exchange contracts 36 – 36 –Financial assets disclosed at fair valueOperating financial assets 10,427 – – 10,427Financial liabilities measured at fair valueInterest rate swaps – hedged 5,113 – 5,113 –Forward foreign exchange contracts 75 – 75 –Cross currency interest rate swaps 341 – 341 –Futures and forward contracts 197 – 197 –Financial liabilities disclosed at fair valueInterest bearing loans and borrowings 35,142 35,142 – –

2013Financial assets measured at fair valueInvestment carried at FVOCI 583 – – 583Forward foreign exchange contracts 95 – 95 –Futures and forward contracts 225 – 225 –Interest rate swaps 156 – 156 –Financial assets disclosed at fair valueOperating financial assets 10,575 – – 10,575Financial liabilities measured at fair valueInterest rate swaps – hedged 4,698 – 4,698 –Forward foreign exchange contracts 40 – 40 –Cross currency interest rate swaps 166 – 166 –Financial liabilities disclosed at fair valueInterest bearing loans and borrowings 35,206 35,206 – –

There have been no transfers between categories within the fair value hierarchy during the year. The fair values of the financial assets and financial liabilities measured at fair value included in the Level 2 category above, have been

determined in accordance with generally accepted pricing models based on a discounted cash flow analysis. The models incorporate various inputs including foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodities.

Investment carried at FVOCI are categorised within Level 3 of the fair value hierarchy. Note 14 provides a reconciliation of the opening balance to the closing balance of the investments carried at FVOCI financial assets.

During the year ended 31 December 2014 and 2013, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

41 Financial risk management objectives and policiesInterest rate riskThe Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations and short-term deposits with floating interest rates. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debts. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount. These swaps are designated to hedge underlying debt obligations. At 31 December 2014, after taking into account the effect of interest rate swaps, approximately 84% of the Group’s borrowings are at a fixed rate of interest (2013: 85%).



Interest rate sensitivityThe following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings and deposits, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax and equity is affected as follows:

Effect on profitbefore tax

AED million

Effect onequity

AED million

2014+15 increase in basis point (18) 222-15 decrease in basis point 18 (223)

2013+15 increase in basis point (18) 749-15 decrease in basis point 18 (879)

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to risk of changes in foreign exchange rates relates primarily to the operating activities (when revenue or expense are denominated in a difference currency from the functional currencies of the subsidiaries), carrying values of assets and liabilities in Canadian Dollars, Euros, Moroccan Dirhams and Indian Rupees and the Group’s net investment in foreign subsidiaries.

The Group hedges part of its net exposure to fluctuations on the translation into AED of its foreign operations by holding certain borrowings in foreign currencies, primarily in Euros.

The following table demonstrates the sensitivity to a reasonably possible change in the Euro, GBP, CAD, Moroccan Dirham and Indian Rupees exchange rates, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities) and the Group’s equity (due to changes in foreign currency translation reserve). The Group’s exposure to foreign currency changes for all other currencies is not material.

Increase/ decrease

in Euro, GBP,Moroccan

Dirham,Indian Rupees

and CAD rates

Effect on profitbefore tax

AED millionEffect on equity

AED million

2014 +5% 43 1,035-5% (43) (1,035)

2013 +5% 167 2,173-5% (167) (2,173)

The movement in equity arises from changes in Euro borrowings in the hedge of net investments in the Netherlands. These movements will partly offset the translation of the Netherland’s operations net assets into AED.

Commodity price riskTAQA GEN X LLC, a subsidiary of TAQA is affected by the volatility of certain commodities. Its operating activities require the ongoing purchase of gas and sale of electricity. Due to volatility in the prices of these commodities, the subsidiary’s management has developed and enacted a risk management strategy regarding commodity price risk and its mitigation. The Group mitigates the commodity price risks using forward commodity contracts.

The following table shows the effect of price changes on the fair value of the forward commodity contracts on the profit before tax:

Change inyear end

price

Effect onprofit

before taxAED million

2014 +10% (87)-10% 87

2013 +10% (62)-10% 62

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41 Financial risk management objectives and policiesContinuedCommodity price risk continuedThe Board of Directors of TAQA approved a commodity hedging policy in the summer of 2010, which authorised management to enter into financial derivative contracts to manage the Group’s exposure to commodity price volatility. TAQA North, a subsidiary of TAQA, developed and enacted a risk management strategy regarding commodity price risk and implemented a hedging programme using zero cost collar and swap contracts to mitigate the risk of crude oil and natural gas price volatility. During the periods ended 31 December 2013 and 2014, TAQA North had hedging programmes in place throughout the year, however the derivative contracts were fully expired at year end and therefore no derivatives were outstanding.

The Group also enters into physical commodity contracts in the normal course of business. These contracts are not derivatives and are treated as executory contracts, which are recognised and measured at cost when the transactions occur.

Equity price riskThe Group’s listed and unlisted securities are susceptible to market price risk arising from uncertainties about future values of the investment securities.

At the reporting date, the exposure to unquoted investments carried at FVOCI financial assets was AED 2 million (2013: AED 583 million). A change of 5% in overall earnings stream of the valuations performed could have an impact of approximately AED 0.1 million (2013: AED 29 million) on the equity of the Group.

Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and other financial instruments.

Trade and other receivables Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on internal rating criteria. Credit quality of the customer is assessed based on an extensive credit rating scorecard.

Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other form of credit insurance. The Group’s largest two customers account for approximately 79% of outstanding trade receivables and amounts due from related parties at 31 December 2014 (2013: 72%). The requirement for impairment is analysed at each reporting date on an individual basis for major costumers. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actually incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 23. The Group does not hold collateral as security.

Other financial instruments and cash depositsCredit risk from balances with banks and financial institutions is managed by the Group’s treasury in accordance with the Group’s policy. Investments of surplus funds are made only with reputable banks and financial institutions. The Group’s maximum exposure to credit risk for the components of the statement of financial position at 31 December 2014 and 2013 is the carrying amounts as illustrated in note 23 except for derivative financial instruments. The Group’s maximum exposure for derivative instruments is disclosed in note 40 and in the liquidity table below, respectively.

Liquidity riskThe Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and other borrowings. The Group’s policy is that the amount of borrowings that mature in the next 12 month period should not cause the current ratio to be less than 100%. During 2014, 3% of the Group’s debt will mature in less than one year (2013: 8%) based on the carrying value of borrowings reflected in the consolidated financial statements.



The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2014 and 2013 based on contractual undiscounted payments:

< 1 yearAED million

1–5 yearsAED million

> 5 yearsAED million

TotalAED million

At 31 December 2014Trade and other payables 3,607 10 – 3,617Bank overdrafts 122 – – 122Interest bearing loans, borrowings and Islamic loans 3,014 29,377 48,353 80,744Advances and loans from related parties 117 – 70 187Loans from non-controlling interest shareholders in subsidiaries 3 16 267 286Amounts due to ADWEA and other related parties 88 – – 88Derivative financial instruments 1,468 5,228 3,283 9,979

Total 8,419 34,631 51,973 95,023

At 31 December 2013Trade and other payables 2,637 1,948 – 4,585Bank overdrafts 94 – – 94Interest bearing loans, borrowings and Islamic loans 13,088 30,178 59,562 102,828Advances and loans from related parties 66 5 70 141Loans from non-controlling interest shareholders in subsidiaries 23 16 271 310Amounts due to ADWEA and other related parties 453 – – 453Derivative financial instruments 1,646 5,758 4,576 11,980

Total 18,007 37,905 64,479 120,391

The disclosed financial derivative instruments in the above table are the gross undiscounted cash flows. However, those amounts may be settled gross or net. The following table shows the corresponding reconciliation of those amounts to their carrying amounts.

< 1 yearAED million

1 – 5 yearsAED million

> 5 yearsAED million

TotalAED million

At 31 December 2014Inflows 661 2,366 1,516 4,543Outflows (1,468) (5,228) (3,283) (9,979)

Net (807) (2,862) (1,767) (5,436)

Discounted at the applicable interbank rates (743) (2,585) (1,379) (4,707)

At 31 December 2013Inflows 806 3,103 2,856 6,765Outflows (1,646) (5,758) (4,576) (11,980)

Net (840) (2,655) (1,720) (5,215)

Discounted at the applicable interbank rates (827) (2,444) (1,294) (4,565)

Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. There are no regulatory imposed requirements on the level of share capital which the Group has not met. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2014 and 31 December 2013.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio within a range to meet the business needs of the Group. The Group includes within net debt, interest bearing loans and borrowings, Islamic loans, less cash and cash equivalents. Capital includes total equity including non-controlling interests less total cumulative changes in fair value of derivatives.

2014AED million

2013AED million

Interest bearing loans and borrowings 74,439 77,330Islamic loans 2,066 2,255Less cash and cash equivalents (3,530) (3,946)

Net debt 72,975 75,639

Equity 8,784 12,314Less cumulative changes in fair value of derivatives 5,293 4,639

Total capital 14,077 16,953

Capital and net debt 87,052 92,592

Gearing ratio 84% 82%

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42 Events after the reporting dateOn 18 March 2015 the UK Government announced a number of changes in the UK oil and gas taxation regime which are designed to reduce the burden of taxation and incentivise further investment. These changes were subsequently enacted into law under the Finance Act 2015 on 26 March 2015. The principal changes impacting TAQA’s UK business comprised a reduction in the rate of Petroleum Revenue Tax from 50% to 35%, a reduction in the rate of Supplementary Charge to Corporation Tax from 32% to 20% and the introduction of an Investment Allowance to provide a new relief against Supplementary Charge, based on capital investment, which replaces a number of existing field allowances. TAQA expects to recognise the financial statement impacts of these changes in Q1 2015 As the changes have only just been announced, it is too early to quantify the impact of the changes on balance sheet deferred tax accounts.

43 Comparative informationCertain comparative numbers were reclassified to conform to the current year presentation. Such reclassifications as discussed below have no effect on the previously reported profit or the equity of the Group.

Statement of cash flows:− Themovementofoperatingfinancialassetshasnowbeensplitoutbetweenconstructioncosts,revenuefromoperatingfinancial

assets and cash received from service concession arrangements.



TAQ

A Annual Report 2014

www.taqaglobal.com

Abu Dhabi NationalEnergy Company PJSC (TAQA)PO Box 55224, Abu DhabiUnited Arab Emirates

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