City Rail Link Limited Statement of Performance Expectations For Financial Year 2017 – 2018
________________________________________________________________________________________ INTRODUCTION
This Statement of Performance Expectations (SPE) sets out the performance expected of City Rail Link Limited (CRLL) for the period 1 July 2017 to 30 June 2018.
Sir Brian Roche
Anne Urlwin
Chair
Director
22 December 2017
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OBJECTIVES OF THE CITY RAIL LINK PROJECT The City Rail Link Project (CRL or Project) is a significant infrastructure project to enhance the capacity and performance of Auckland rail services and improve transport outcomes in Auckland. The Project comprises a 3.45km twin tunnel underground rail link from the existing Britomart Transport Centre connecting to the Auckland Rail Network at a redeveloped Mt Eden Station with two new stations at Aotea and Karangahape. The Minister of Finance, Minister of Transport and Auckland Council (Shareholders) have agreed to co-fund and partner on the delivery of the Project, and collaborate on other initiatives, with the following overarching objectives: •
improve transport access into and around the Auckland City Centre for a rapidly growing Auckland;
•
improve the efficiency and resilience of the Transport Network of urban Auckland;
•
significantly contribute to lifting and shaping Auckland’s economic growth;
•
provide a sustainable transport solution that minimises environmental impacts;
•
contribute positively to a liveable, vibrant and safe city; and
•
deliver the CRL Project with a ‘best for Auckland’ approach.
________________________________________________________________________________________ OBJECTIVES OF CITY RAIL LINK LIMITED CRLL is responsible and accountable to its Shareholders for managing the delivery and completion of the Project. ________________________________________________________________________________________ FUNCTIONS AND OPERATIONS The Board provides governance and assurance that Management is delivering to the objectives. The Chief Executive has appointed a leadership team to provide direction and oversight to the activities of the Company. The Project is managed via a series of workstreams and team structure is adapted progressively in keeping with the evolving requirements of the Project through its lifecycle. The Company has been established with the understanding that its primary purpose is to deliver the Project, and has a finite life span. ESTABLISHMENT As CRLL commenced its first year as an operating company on 1 July 2017 some of the Company’s performance targets for the 2018 year relate to the establishment of the Company and associated transfer of assets. It has an established baseline of cost developed under the governance and management of Auckland Transport. Reporting against the baseline will assist Management and the Board in implementing the Project and keeping the Shareholders informed of progress. CRLL will report regularly to the Shareholders, and to the Sponsors as set out in the Project Delivery Agreement. CRLL is established with adequate fit-for-purpose infrastructure, organisational structure and processes to enable the delivery of the Project as defined in the business scope (assets acquired up to 30 June 2017 are transferred to CRLL to ensure Project momentum is maintained). CRLL is a single output class reporting entity.
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PERFORMANCE TARGETS Milestones and KPI’s for 2018 Financial Year The performance targets for the Financial Year 2018 relate to the delivery programme, health and safety and the property procurement programme. Delivery Programme CRLL’s primary objective, as set out in the clause 4 of the Project Delivery Agreement, is to manage, deliver and complete the CRL Project. Indicative dates as to completion of programme elements are set out in Schedule 5 of the Project Delivery Agreement. KPI - CRLL will report on its performance against these milestones to the Sponsors under the Project Delivery Agreement. Health and Safety CRLL is committed to being a leader in health and safety, ensuring compliance with the Health and Safety at Work Act 2015 and to a culture that holds safety as a core part of the Company’s identity. KPI - A revised Health & Safety Management System will be completed and approved by the Board by the end of quarter 2. Property Procurement Programme Schedule The property procurement programme is a key part of the Company’s acitivites in FY18, and negoitations have already commenced on subterranean strata property acquisitions. KPI – Commence negotiations on partial surface and construction occupation acquisitions by the end of quarter 4. Forecast Financial Statements The forecast financial statements below include a Statement of Forecast Comprehensive Revenue and Expenses, Statement of Forecast Financial Position, Statement of Forecast Changes in Equity and Statement of Forecast Cash Flows for the 2018 financial year. CRLL is funded to deliver the Project. Under the terms set out in the Project Delivery Agreement dated 30 June 2017, funding is recognised as share capital. Other funding received by CRLL by way of rental income from properties required to be purchased to enable the build but not yet decommissioned will be recorded as revenue in the Income Statement. CRLL incurs expenditure as part of its various activities. Operating expenditure (i.e. the day to day running of CRLL) and project expenditure (i.e. unable to be capitalised) is recorded in the Statement of Forecast Comprehensive Revenue and Expenses. This expenditure is funded by the Shareholders. Project expenditure that is capital in nature is recorded on the balance sheet as Capital Work in Progress.
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Statement of Forecast Comprehensive Revenue and Expenses For the year ended 30 June 2018 Forecast 2018 $000 Revenue Other revenue
1,018
Total Revenue
1,018
Expenditure Personnel Costs
(1,211)
Professional Fees
(797)
Rental Expenses
(286)
Other expenses
(1,205)
Total Expenditure
(3,499)
Surplus/(Deficit)
(2,481)
Other Comprehensive Revenue and Expense Gain on property revaluations
-
Total other comprehensive revenue and expense
-
Total Comprehensive Revenue and Expense
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(2,481)
Statement of Forecast Financial Position For the year ended 30 June 2018
Assets Current Assets Cash and cash equivalents Receivables Prepayments Non-current assets held for sale Total Current Assets
Forecast 2018 $000 990 3,460 4,450
Non-Current Assets Property, Plant and Equipment Intangible Assets Total Non-Current Assets Total Assets
584,183 584,183 588,633
Liabilities Current Liabilities Payables and deferred revenue Employee Entitlements Provisions Total Current Liabilities
(14,510) (343) (14,853)
Non-Current Liabilities Employee Entitlements Provisions Total Non-Current Liabilities Total Liabilities Net Assets
(14,853) 573,780
Equity Contributed capital Accumulated Surplus/(Deficit) Property Revaluation Reserve Total Equity
576,261 (2,481) 573,780
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Statement of Forecast Changes in Equity For the year ended 30 June 2018 Forecast 2018 $000 Balance at 1 July
-
Total Comprehensive Revenue and Expenses for the year Net Surplus/(Deficit) for the year
(2,481)
Owner Transactions Share Capital Issues Property Revaluation Reserve Movement Balance at 30 June
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576,261 573,780
Statement of Forecast Cash Flows For the year ended 30 June 2018
Forecast 2018 $000 Cash Flows from Operating Activities Interest Received Receipts from other Revenue GST (net) Payments to Suppliers Payments to Employees
1,018 (1,421) (1,665)
Net cash flow from operating activities
(2,068)
Cash Flows from Investing Activities Receipts from sale of property, plant and equipment Purchase of property, plant and equipment
(573,203)
Net cash flow from Investing Activities
(573,203)
Cash Flows from Financing Activities Proceeds on issue of shares
576,261
Net cash flow from Financing Activities
576,261
Net Increase/(Decrease) in cash and cash equivalents
990
Cash and cash equivalents at the beginning of the year
-
Cash and cash equivalents at the end of the year
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990
Notes to the Forecast Financial Statements Reporting Entity CRLL is a limited liability company incorporated under the Companies Act 1993. CRLL is a majority Crownowned entity, listed under Schedule 4A of the Public Finance Act 1989 and subject to the Crown Entities Act 2004, the Official Information Act 1982 and the Ombudsmen Act 1975. Its shareholders are the Minister of Finance, the Minister of Transport and Auckland Council. The purpose of CRLL is to manage, deliver and complete the Project in accordance with the Project Delivery Agreement.
Basis of Preparation These prospective financial statements have been prepared: •
in accordance with the relevant requirements of the Public Finance Act 1989 and the Crown Entities Act 2004, which include the requirement to comply with New Zealand generally accepted accounting practice (NZGAAP);
•
in accordance with PBE FRS42 and NZGAAP as it relates to prospective financial statements;
•
on a historical cost basis modified by the revaluation of certain assets and liabilities; and
•
in New Zealand dollars rounded to the nearest one thousand, unless separately identified.
The actual financial results achieved for the period covered are likely to vary from the information presented and the variations may be material. Significant Accounting Policies The following accounting policies significantly affect the measurement of financial performance and position. Revenue Project Funding Project costs which are capital in nature create an asset for CRLL as well as operating costs for the day to day running and management and are funded by a share issue to the Crown and Auckland Council. This funding is not recognised as revenue in the forecast financial statements. Rental Revenue Other revenue generated by CRLL is for rental income from properties required to be purchased to enable the build but not yet decommissioned will be recorded as revenue. Foreign Currency Transactions Foreign currency transactions are translated into NZ$ (the functional currency) using the spot exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
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transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the surplus or deficit.
Goods and Service Tax Items in the financial statements are presented exclusive of GST, except for receivables and payables, which are presented on a GST inclusive basis. Where GST is not recoverable as input tax, it is recognised as part of the related asset or expense. The net amount of GST recoverable from, or payable to, the IRD is included as part of receivables or payables in the statement of financial position. The net GST paid to, or received from, the IRD including the GST relating to investing and financing activities, is classified as a net operating cash flow in the statement of cash flows. Commitments and contingencies are disclosed exclusive of GST. Income Tax CRLL is exempt from the payment of income tax. Accordingly, no provision has been made for income tax. Personnel Costs Defined contribution superannuation scheme Employer contributions to Kiwisaver, the Government Superannuation Fund are accounted for as defined contribution superannuation schemes and are expensed as incurred. Property, Plant & Equipment Property, plant and equipment consists of four asset classes which are measured as follows: •
Land, at fair value
•
Buildings, at fair value less accumulated depreciation
•
Leasehold improvements, at cost less accumulated depreciation and impairment losses
•
Furniture and office equipment, at cost less accumulated depreciation and impairment losses.
Revaluations Land and Buildings are revalued annually to ensure that the carrying amount does not differ materially from fair value. Land and building revaluation movements are accounted for on a class-of-asset basis. The net revaluation results are credited or debited to other revenue or expenditure and are accumulated to an asset revaluation reserve in equity for that class of asset. Where this would result in a debit balance in the asset revaluation reserve, this balance will be recognised in the surplus or deficit.
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Additions The cost of an item of property, plant and equipment will be recognised as an asset only once the contracted works are completed and costs have been fully recognised. This includes items such as property purchases and other assets which are not part of the construction works. Work in progress is recognised at cost less impairment and is not depreciated. Depreciation Depreciation is provided on a straight-line basis on all property, plant and equipment other than land, at rates that will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives. The useful lives and associated depreciation rates of major classes of property, plant and equipment are estimated as follows: Buildings (including components)
25 to 60 years
1.6% - 4%
Leasehold improvements
10 years
10%
Furniture and equipment
5 years
20%
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter. Share Capital and Equity All shares issued are fully paid and have a face value of $1 each. The Shareholders investment in CRLL is made up of 3 shares as at 1 July 2017 and is expected to be 576,260,608 shares as at 30 June 2018. Critical Accounting Estimates and Assumptions In preparing these prospective financial statements, CRLL have made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have significant risk of causing material adjustment to the carrying amount of the assets and liabilities within the forecast financial statements are: •
Revenue and expenditure forecast uncertainty with regards to timing and amount of future transactions related to properties held for future project works.
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