43 minute read
Notes to the Financial Statements
1. Statement of accounting policies
1.1 Reporting entity
City Rail Link Limited (the ‘Company’ or 'CRL Ltd') is a Crown Entity, registered under schedule 4A of the Public Finance Act and is domiciled in New Zealand. The Company was incorporated on 13 April 2017. The Company is owned by the Crown (51 per cent shareholder through the Minister of Transport and Minister of Finance) and Auckland Council (49 per cent). The Company’s purpose is to govern and manage the delivery of the City Rail Link project. CRL Ltd commenced operations with effect from 1 July 2017. The financial statements of the Company are for the year ended 30 June 2021. These financial statements were authorised by the CRL Ltd Board on the date specified on page 51.
1.2 Basis of preparation
The financial statements have been prepared on a going concern basis and the accounting policies have been applied consistently throughout the year. The financial statements of the Company have been prepared in accordance with the requirements of the Crown Entities Act 2004, which includes the requirement to comply with generally accepted accounting practice in New Zealand (NZ GAAP) and the Companies Act 1993. The Company is a Public Benefit Entity (PBE) for financial reporting purposes and reports under Tier 1 PBE standards. The financial statements are presented in New Zealand Dollars ($000), which is the Company’s functional currency and have been prepared on an accrual and historical cost basis.
1.3 Standards issued, not yet effective and not early adopted
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are unlikely to have an impact on the Company's financial position, performance, and/or disclosures.
Amendment to PBE IPSAS 2 Cash flow statement
An amendment to PBE IPSAS 2 requires entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. This amendment is effective for the year ending 30 June 2022, with early application permitted. This amendment will result in additional disclosures. CRL Ltd does not intend to early adopt the amendment.
PBE IPSAS 41 Financial instruments
PBE IPSAS 41 Financial Instruments was issued in March 2019. This standard supersedes PBE IFRS 9 Financial Instruments, which was issued as an interim standard. It is effective for reporting periods beginning on or after 1 January 2022. CRL Ltd has assessed the effect of the new standard and it does not expect any significant changes as the requirements are similar to PBE IFRS 9. PBE IPSAS 41 Amendment was issued in February 2020. These amendments are in relation to PBE Interest Rate Benchmark reform. CRL Ltd has chosen not to early adopt PBE IPSAS 41. There are no significant changes expected upon adoption in January 2022.
PBE FRS 48 Service Performance Reporting
PBE FRS 48 replaces the service performance reporting requirements of PBE IPSAS 1 and is effective for reporting periods beginning on or after 1 January 2022. CRL Ltd has assessed the effect of the new standard and it does not expect any significant changes.
1.4 Cash and cash equivalents
Cash comprises cash at bank and short-term deposits with a maturity of three months or less.
1.5 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Acting on behalf of the Link Alliance OAPs (for the C3/5/7 works per the Project Alliance Agreement and the Project Alliance Agreement Variation), CRL Ltd has entered into foreign exchange forward contracts to hedge payment obligations for the import of key plant and services (foreign currency exposures are predominately in EUR, AUD and USD). CRL Ltd is not taking direct foreign exchange exposure but is acting as an intermediary between the Link Alliance and the bank in order to facilitate hedging of these exposures. CRL Ltd recognises the foreign exchange forward transactions at fair value on the day they are entered into with the bank with an equivalent contra transaction recognised with Link Alliance at the same time. CRL Ltd are invoiced by Link Alliance in foreign currency for all settlements in order to fully clear the foreign currency on settlement. Link Alliance is CRL Ltd's counterparty in these transactions and remains CRL Ltd's counterparty for the C3/5/7 works. Overseas payment
obligations incurred by the Link Alliance for the C3/5/7 works are required to be fully settled by CRL Ltd and hence there is no additional credit exposure for CRL Ltd. CRL Ltd does not enter into derivatives for trading or speculative purposes. The derivatives are presented as current assets and liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
Financial assets
Financial assets were initially recognised at fair value. Trade and other receivables are usually received within 30 days of recognition. CRL Ltd actively manages unpaid debtors beyond 30 days. After initial measurement, such financial assets are subsequently measured at amount due less an allowance for credit losses.
Derivative financial instrument assets are initially recognised at fair value on the day they are entered into. Subsequent to initial recognition, derivatives are remeasured to fair value with the resulting gain or loss recognised in surplus or deficit.
Financial liabilities
Financial liabilities are classified as payables. The Company's financial liabilities include trade and other payables. Trade and other payables are unsecured and are usually paid within 30 days of recognition. Due to their shortterm nature they are not discounted. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Derivative financial instrument liabilities are initially recognised at fair value and remeasured to fair value at each reporting date with the resulting gain or loss recognised in surplus or deficit. CRL Ltd's derivative financial instrument assets are equivalent (equal and opposite) to CRL Ltd's derivative financial instrument liabilities.
1.6 Capital work in progress (WIP)
CRL Ltd capitalises those costs directly attributable to the construction of the project. These are captured under 'Capital work in progress' in note four below. CRL Ltd also capitalises a portion of the overhead costs that is deemed to be required to support the construction of the actual physical works. This allocation of cost is reviewed regularly to ensure the method adopted remains appropriate for the stage of the project. When separable assets within the project are completed there is an agreed handover procedure to the new recipient of the asset. The asset is then removed from CRL Ltd's WIP and vested to the new owner. Where an asset is identified for handover, the process for this transfer is advanced and expected to complete, CRL Ltd will report this separately under 'Assets held for transfer'.
1.7 Assets held for transfer
An asset is classified as held for transfer if it has been handed over to the receiving party for operational use and is still awaiting formal sign-off and acceptance as per the asset transfer process with individual receiving parties. The asset is measured at the lower of cost or net realisable value. An asset is not depreciated or amortised while classified as held for transfer. The asset transfer will be completed within 12 months of being classified as 'held for transfer'.
1.8 Third party works
In the 2021 financial year CRL Ltd funded work undertaken by KiwiRail Holdings Limited (KiwiRail), on the KiwiRail network at Ōtāhuhu, Mt Eden, Newmarket and Britomart East. As part of the overall project, CRL Ltd will undertake or fund construction work, such as that at Ōtāhuhu, Mt Eden, Newmarket and Britomart East, across the wider Auckland rail network. This will enable the network to manage the larger volumes of rail passengers arising from the completion of the project. The nature of the work done, and the ownership of the assets constructed, means that they do not form part of the CRL Ltd assets, in accordance with NZ GAAP.
1.9 Third party funding
CRL Ltd receives additional funding from third parties (including the Sponsors and potentially related parties) for the construction of agreed specific works that are in addition to existing scope. The third party funding is used to reimburse CRL Ltd for the works so that CRL Ltd is kept financially neutral. In facilitating these works CRL Ltd is effectively acting in an agency capacity.
1.10 General expenses
General expenses includes costs such as operating leases, rates, Directors' fees, telecommunications and other office operating costs.
1.11 Property, plant and equipment
Property, plant and equipment consist of land, buildings, temporary buildings, subterranean land, furniture and fittings, computer hardware and office equipment.
Recognition and measurement
Property, plant and equipment is measured initially at cost. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of property plant and equipment is recognised only when it is probable that future economic benefit or service potential
associated with the item will flow to the Company, and the item’s cost can be measured reliably. The majority of capital expenditure will remain as 'Capital work in progress' for the duration of the project.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the entity. Repairs and maintenance costs are recognised as expenditure as incurred.
Depreciation
Land, buildings and subterranean land held for the development of rail tunnels and stations are not depreciated. All other assets (including temporary buildings constructed) are depreciated on a straight-line basis over the useful life of the asset. Depreciation is charged at rates calculated to allocate the cost or valuation of the asset less any estimated residual value over its remaining useful life. The estimated useful lives of buildings, property, plant and equipment are as follows: Land and buildings Not depreciated Temporary buildings 4 years Subterranean land Not depreciated Furniture and fittings 5 years Office equipment 5 years Computer hardware 5 years The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon disposal, demolition or when no further future economic benefits or service potential are expected from its use or disposal. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in surplus or deficit.
Impairment of non-cash generating assets
For non-financial, non-cash-generating assets, CRL Ltd assesses at each reporting date whether there is an indication that a non-cash-generating asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, CRL Ltd estimates the asset’s recoverable service amount. An asset’s recoverable service amount is the higher of the non-cash-generating asset’s fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable service amount, the asset is considered impaired and is written down to its recoverable service amount. In assessing value in use, CRL Ltd has adopted the depreciation replacement cost approach. Under this approach, the present value of the remaining service potential of an asset is determined as the depreciated replacement cost of the asset. The depreciated replacement cost is measured as the reproduction or replacement cost of the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reflect the already consumed or expired service potential of the asset. In determining fair value less costs to sell, the price of the asset in a binding agreement in an arm's length transaction, adjusted for incremental costs that would be directly attributed to the disposal of the asset, is used. If there is no binding agreement, but the asset is traded on an active market, fair value less cost to sell is the asset's market price less cost of disposal. If there is no binding sale agreement or active market for an asset, CRL Ltd determines fair value less cost to sell based on the best available information. Impairment losses are recognised immediately in surplus or deficit. For each asset, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, CRL Ltd estimates the asset's recoverable service amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable service 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 service 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 a reversal is recognised in surplus or deficit.
1.12 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. The Company has no internally generated intangible assets. The useful lives of intangible assets are assessed as finite. Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for
an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits or service potential embodied in the asset are considered to modify 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 surplus or deficit. 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 surplus or deficit when the asset is derecognised.
Software
The Company holds several computer software packages for internal use, including purchased software. Purchased software is recognised and measured at the cost incurred to acquire the software. A summary of the policies applied to the Company’s intangible assets is as follows:
Intangible asset Useful life Amortisation method
Software 5 years Straight-line basis
1.13 Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date. The substance of the arrangement depends on 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, even if that right is not explicitly specified in an arrangement.
Company as a lessee
Operating leases are leases that do not transfer substantially all the risks and benefits incidental to ownership of the leased items to the Company. Operating lease payments are recognised as an operating expense in surplus or deficit on a straight-line basis over the lease term.
Company as a lessor
Rent received from an operating lease is recognised as income on a straight-line basis over the lease term. Contingent rents are recognised as revenue in the periods in which they are earned.
1.14 Employee benefits
Liabilities for wages and salaries (including non-monetary benefits) and annual leave are recognised in surplus or deficit during the periods in which the employees rendered the related services, and are generally expected to be settled within 12 months of the reporting date. The liabilities for these short-term benefits are measured at the amounts expected to be paid when the liabilities are settled. Expenses for sick leave are recognised when the leave is taken and are measured at the rates paid. 1.15 Equity
Equity is made up of accumulated comprehensive revenue and expense, and contributed capital. Accumulated comprehensive revenue and expense is the Company’s accumulated surplus or deficit since the formation of the Company. Contributed capital represents the transfer of project costs based on a Settlement Agreement between the Crown and Auckland Council as well as shares issued to the shareholders, the Crown and the Auckland Council for funding of the project. 1,000 Ordinary shares were issued for the contributed capital with B Class shares being issued for funding. Each funding share represents one New Zealand dollar.
1.16 Revenue
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Company and revenue can be reliably measured. Revenue is measured at the fair value of the consideration received. The following specific recognition criteria must be met before revenue is recognised.
Rental revenue
Rental revenue arising from operating leases on investment properties is accounted for on a straight-line basis over the lease term and is included in revenue in the statement of financial performance due to its operating nature. Outstanding customer receivables are monitored monthly and balances >30 days are followed up for recovery. As at 30 June 2021, there were no property debtors with outstanding balances (2020: 5). No provision for credit losses or allowances have been accounted for as a result.
Interest revenue
Interest is received on the cash held at bank and short-term deposits maturing within less than three months. Interest income is included in revenue in the statement of financial performance.
1.17 Tax
CRL Ltd is a Public Entity in accordance with the Income Tax Act 2007 and consequently is exempt from the payment of income tax. Accordingly, no provision has been made for income 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 the IRD is included as part of receivables 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.
The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets or liabilities affected in future periods.
i. Judgements
In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
ii. Operating lease commitments – Company as lessor
The Company has entered into commercial and rental property leases on its property portfolio. The
Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as a lease term not constituting a substantial portion of the economic life of a property, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.
The bulk of these properties have been demolished in preparation for the new stations being constructed on these sites.
iii. Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, which 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 Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
iv. Useful lives and residual values
The useful lives and residual values of assets are assessed using the following indicators to inform potential future use and value from disposal: • The condition of the asset based on the assessment of experts employed by the Company • The nature of the asset and its susceptibility and adaptability to changes in technology and processes • Changes in the market in relation to the asset • The estimated useful lives of the asset classes held by the Company are listed in notes 1.10 and 1.11
v. Covid-19
There were a number of Covid-19 Alert Level announcements by the New Zealand Government over the course of the 2020-21 financial year. The Alert
Levels ranged from Level 1, 2 and 3, in some cases were specifically applicable to the Auckland area and therefore were directly relevant to the work of the CRL project.
Contract types
CRL Ltd has entered into three types of contracts that are subject to Covid-19 claims and each form of contract has been reviewed for Covid-19 cost impact: i. Construct Contracts (per NZS3910 form of contract) for C1, C2 and C8 Ōtāhuhu Station Works; ii. Cost reimbursable in the form of Funding Agreements with KiwiRail Holdings Limited for C8 Ōtāhuhu Track Works and C5 Mt Eden Single Line Enabling Works (MESLEW); and iii. Project Alliance Agreement (PAA) with Link Alliance for C3. At 30 June 2021 CRL Ltd has paid Covid-19 related claims totalling $2.22m (excluding GST) across the C1, C2, C8 station works and C5 MESLEW contracts. These are based on assessments by the engineer to the contract. The claims received and paid are contract variations for extension of time and costs caused by the change in law and per the terms of NZS3910 Conditions of contract for building and civil engineering construction which is the standard form of contract used in the New Zealand construction market. All claims paid under NZS3910 contracts are assessed and capitalised or expensed based on the nature of the work performed and including but not limited to, if the cost is directly attributable to the construction and completion of that asset. CRL Ltd's cost reimbursable contracts are currently the form of contract used for work performed by KiwiRail. All work undertaken by KiwiRail is treated as third party works and is expensed in the year they are incurred.
CRL Ltd has not paid any Covid-19 claims to Link Alliance in the financial year ended 30 June 2021. High level indications of costs incurred by Link Alliance have been received but they have not yet been substantiated with adequate supporting information to allow a provision to be made for these costs in the FY2021 accounts. Notwithstanding the full cost impact of Covid-19 is yet to be finally determined across CRL Ltd's construction contracts, at this stage the expectation is that such costs will be able to be accommodated within the existing project budget. The claims not yet received will represent costs incurred in CRL Ltd's financial statements for 2021/22. CRL Ltd expects to incur further Covid-19 costs (for example delays related to access to skilled workers from offshore) which are not able to be quantified at this stage. The assessment of the impact of Covid-19 on CRL Ltd's 'Statement of Financial Performance' and 'Statement of Financial Position' is set out below based on information available at the time of preparing the financial statements.
Financial Statements Covid-19 Assessment
Rental revenue There has been no material impact on rental revenues due to Covid-19. The rental revenue budget for 2020-21 is materially lower due to demolition of the majority of the buildings purchased.
Trade receivables CRL Ltd has reviewed trade receivables and does not expect any credit losses resulting from Covid-19. The majority of trade receivables consist of GST refunds.
Property, plant Plant and equipment are stated at historical cost less depreciation and impairment. CRL Ltd has and equipment completed an impairment assessment and concluded that no impairment is required. This is supported by updated land valuations obtained late 2020. Property is valued at historical cost and consists largely of land values.
Capital work CRL Ltd capitalises those costs directly attributable to the construction of the project including in progress payments to contractors for construction works, resource consents and compliance requirements. CRL Ltd has completed a review of these costs and concluded that no impairment is required. Capital work in progress is measured at lower of cost or net realisable value.
Third party works These are works in progress by KiwiRail. All Covid-19 related costs are included in these third party works costs. CRL Ltd has completed a review of these costs and concluded that no impairment is required.
Proceeds from issue The Crown and Auckland Council (the “Sponsors”) provide all funding for the project. The Crown of contributed capital has made appropriation for funding for 2021/22 (per Vote Transport). Auckland Council has budgeted the required funding for CRL Ltd in 2021/22. The Sponsors remain committed to meet all currently forecast funding requirements of the project until project completion.
vi. Business Hardship Programme
The Business Hardship Programme (BHP) was launched in December 2019. The programme was set up to provide assistance to small retail businesses that were directly impacted by the delay to completion of the C2 contract works within the Albert Street Impact Zone (between the Victoria and Customs Street intersections). The C2 works completed in October 2020.
vii. Asset transfers
As CRL Ltd completes certain contracts it may transfer separable assets (including assets related to a number of utility services) from CRL to the Sponsors or their subsidiaries as those assets are commissioned for use. However, the ownership of the majority of CRL Ltd's key assets will stay with CRL Ltd until the completion of the project. Therefore, they will remain as CRL Ltd Capital work in progress until that time. Per PBE IPSAS 37 Joint Arrangements, CRL Ltd continues to be classified as a joint venture (as opposed to joint operation) by the Sponsors as the ultimate ownership of the CRL assets is yet to be determined. Any separable assets transferred prior to project completion will transfer without compensation and hence will be treated as a vested asset in the period in which the asset transfer occurs.
CRL Ltd will recognise a vested asset expense on transfer of the asset.
30 June 2021 Subterranean land Land and buildings Temporary buildings
Furniture and fittings
Office equipment Total
Cost $(000) $(000) $(000) $(000) $(000) $(000) Balance at 1 July 2020 13,282 117,098 13,580 164 480 144,604 Transferred/reclassified assets - - 2,037 - - 2,037 Additions 533 54 - 2 8 597 Disposals and demolitions (751) (9) - - - (760) Balance at 30 June 2021 13,064 117,143 15,617 166 488 146,478
Depreciation
Balance at 1 July 2020 Depreciation for the year Disposals and demolitions
Balance at 30 June 2021
- - 10,185 91 223 10,499 - - 5,432 36 96 5,564
- - 15,617 127 319 16,063
Net book value at 30 June 2021 13,064 117,143 - 39 169 130,415
30 June 2020 Subterranean land Land and buildings Temporary buildings
Furniture and fittings
Office equipment Total
Cost $(000) $(000) $(000) $(000) $(000) $(000) Balance at 1 July 2019 4,465 141,102 13,580 601 517 160,265 Transferred/reclassified assets (24) (97) - - 5 (116) Additions 8,841 - - - 16 8,857 Disposals and demolitions - (23,907) - (437) (58) (24,402) Balance at 30 June 2020 13,282 117,098 13,580 164 480 144,604
Depreciation
Balance at 1 July 2019 Depreciation for the year Disposals and demolitions
Balance at 30 June 2020
- - 6,790 228 141 7,159 - - 3,395 71 101 3,567 - - - (208) (19) (227) - - 10,185 91 223 10,499
Net book value at 30 June 2020 13,282 117,098 3,395 73 257 134,105
Land and buildings disposals in 2019/20 include the impact of building demolitions. These demolitions were required to allow Link Alliance works to commence, particularly at Mt Eden. There are no items of property, plant and equipment (PPE) where title has been restricted or that have been used for security against liabilities.
Software
Cost
Balance at 1 July Additions
Disposals
Balance at 30 June 30 June 2021 30 June 2020
$(000)
$(000)
817 1,237 15 -
- (420)
832 817
Amortisation
Balance at 1 July Amortisation for the year Disposals
Balance at 30 June
479 416
164 199
- (136)
643 479
Net book value at 30 June 189
There are no intangible assets where title is restricted or pledged as security for liabilities.
338
4. Capital work in progress
Capital work in progress is measured at the lower of cost or net realisable value.
Cost
Balance at 1 July Vested assets
Assets held for transfer
Transfers to PPE
Additions
Balance at 30 June 30 June 2021 30 June 2020
$(000)
$(000)
954,470 580,591 (43,910) (39,435) (174,612) - (2,037) - 807,210 413,314
1,541,121 954,470
Impairment
Balance at 1 July Impairment for the year
Balance at 30 June
27,096 27,096 2,181 -
29,277 27,096
Net book value at 30 June 1,511,844 927,374
Capital work in progress costs include payments to contractors for the actual construction works, resource consents, compliance requirements and costs incurred in the design, procurement and supervision of the works. CRL Ltd also capitalises a portion of the overhead costs that it deems is required to support the construction of the actual physical works. Examples of these overhead costs include CRL Ltd staff costs and operating costs such as rent and utilities. For 2021 the total value of overhead costs capitalised is $9.8m (2020: $10.3m). CRL Ltd reviews its capital work in progress bi-annually to identify any impairment of the carrying value of its assets. Vested assets refer to those assets transferred to the Sponsors on contract completion (see note 1.17 (vii)). Two assets were transferred to Auckland Council during FY21. They consisted of balance of C2 (C2 SP2 transferred in FY20), and C8 Ōtāhuhu Station Works. Assets held for transfer include C1 SP3 (Chief Post Office and Britomart Station restoration) and C1 SP5 (Urban Realm). We expect to vest these assets within FY22.
Cash at bank
Short-term deposits
Total 30 June 2021 30 June 2020 $(000) $(000)
18,374 4,462 - 37,500
18,374 41,962
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company and earn interest at the respective short-term deposit rates. Deposits are placed with Bank of New Zealand and/or ANZ Bank New Zealand Limited. Both banks have AA- long-term credit ratings from Standard & Poor's rating agency. While cash and cash equivalents at 30 June 2021 are subject to the expected credit loss requirements of PBE IFRS 9, no loss allowance has been recognised because the estimated loss allowance for credit losses is trivial.
Reconciliation of operating surplus with net cash from operating activities
Surplus/(deficit) for the year
Adjustments for:
Depreciation and amortisation Increase in provisions Interest accrued (not received) Write-off on property, plant and equipment Vested asset transfer
Impairment of Capital work in progress
30 June 2021 30 June 2020 $(000) $(000)
(79,903) (113,002)
5,728 3,764 (3,370) (97) - (21) 484 24,459 43,910 39,435 2,181 -
Working capital movements:
(Increase) in accounts receivable, prepayments and other assets (Decrease) in accounts payable, accruals and other liabilities
Cash generated from operating activities
(2,964) (44,691) (5,307) 143
(39,241) (90,010)
Short-term receivables are recorded at the amount due, less an allowance for credit losses. CRL Ltd applies the simplified expected credit loss model of recognising lifetime expected credit losses for receivables. In measuring expected credit losses, short-term receivables have been assessed on a collective basis as they possess shared credit risk characteristics. These have been grouped based on the days past due. Short-term receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include the debtor being in liquidation.
Current
Trade receivables
GST receivable
Sundry receivables Prepayments
Non-Current
Prepayments
30 June 2021 30 June 2020
$(000) $(000)
898 5,906 8,389 8,260 32 21
8,292 7,232 17,611 21,419
24,555 31,709 42,166 53,128
As at 30 June, the aging analysis of trade receivables was:
$(000) $(000) $(000) $(000) 0 - 30 days 30 - 60 days 60 - 90 days >90 days
Trade receivables 30 June 2021 895 - 3 Trade receivables 30 June 2020 5,894 - - 12
There have been no changes in the estimation techniques or significant assumptions used in measuring the loss allowance during the reporting period. Related party receivables relate to reimbursable expenses as agreed by contract with Auckland Council as per normal arm's length transactions. Prepayments relates to insurance premiums paid in advance for the works undertaken by Link Alliance over the estimated life of the works and are recognised as both current and non-current assets. The insurance provides for contract works, public liability and professional indemnity insurance.
7. Accounts payable and accruals
Accounts payable and accruals represent liabilities of goods and services provided to the entity that have not been paid at the end of the financial year. Accounts payable and accruals are classified as other liabilities and are measured at amortised cost.
Note 30 June 2021 30 June 2020 $(000) $(000)
Trade payables Related parties payables Sundry payables and accruals 2,718 2,713 12 31 146
67,149 56,208 69,898 59,067
Terms and conditions of the above financial liabilities: • Trade payables are non-interest bearing and are normally settled on the 20th of the month following • Related party payables mainly relate to accruals for Land & Property Specialist Services and printing services procured from Auckland Council • Sundry payables and accruals are non-interest bearing and have an average term of three months
Annual leave
Accrued salaries and wages
30 June 2021 30 June 2020 $(000) $(000)
764 551
139 587
903 1,138
9. Commitments and contingencies
Operating lease commitments - Company as a lessee
The Company has entered into commercial leases. These leases have an average life of between three and five years, with renewal options included in the contracts. There are no restrictions placed upon the Company by entering into these leases. Future minimum rentals payable under non-cancellable operating leases as at 30 June are, as follows:
Less than one year One to five years More than five years
30 June 2021 30 June 2020 $(000) $(000)
996 1,046 2,566 3,608
3,562 4,654
Operating lease commitments - Company as a lessor
The Company has entered into commercial and rental property leases on its property portfolio consisting of the Company's buildings. These non-cancellable leases have remaining terms of between one and three years. Each lease includes a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. Future minimum rentals receivable under non-cancellable operating leases as at 30 June are as follows:
Less than one year One to five years More than five years
30 June 2021 30 June 2020 $(000) $(000)
44 119
106 198
150 317
Commitments
As of 30 June 2021, the Company had commitments of $1.676b (2020: $1.598b) relating to the project (in relation to capital work in progress). The increase in commitments primarily reflects the execution of the PAA Variation Agreement with Link Alliance.
Contingencies
As of 30 June 2021, CRL Ltd is a party to various claims and sundry disputes. Where it has been assessed that the likelihood of having to make a payment meets the recognition criteria for a provision, this has been included in the financial statements (2020: $Nil). As of 30 June 2021 there were three claims before the courts for which CRL Ltd is a directly or indirectly involved party. These include (i) Auckland Council v Samson Corporation Limited appeal of a Land Value Tribunal (LVT) decision on the level of compensation relating to subterranean access rights for the CRL tunnel construction; and (ii) YMCA North Incorporation v Auckland Council claim with LVT in relation to compensation for subterranean access rights for the CRL tunnel construction; (iii) Wilson Parking Ltd PWA compensation claim relating to the CRL works in the vicinity of Durham Street, Auckland. There is the likelihood of additional claims for Covid-19 costs. We anticipate settlement of the current claims in the 2021/2022 financial year but this may extend beyond this timeframe subject to future Covid-19 impacts including the Level 4 lockdown that commenced on 17 August 2021. The expectation is that such costs will be able to be accommodated within the existing project budget.
The table below summarises the maturity profile of the Company's financial liabilities which show the timing of the cash outflows and the maturity profiles of financial assets held by the Company which are readily saleable or expected to generate cash inflows to meet the cash outflows of the financial liabilities. The amounts disclosed are undiscounted contractual cashflow.
Financial assets (at amortised cost)
Cash
Receivables
30 June 2021 30 June 2020 $(000) $(000)
18,374 41,962 9,222 13,159 27,596 55,121
Financial liabilities (at amortised cost)
Financial liabilities 69,898 59,067
69,898 59,067
30 June 2021 Carrying amount On demand Less than six months
Six to twelve months Total contractual cashflows
Non derivative financial assets
Cash
$(000) $(000) $(000) $(000) $(000)
18,374 18,374 - - 18,374 Receivables 9,222 - 5,288 3,934 9,222
Total non derivative financial assets 27,596 18,374 5,288 3,934 27,596 Non derivative financial liabilities
Financial liabilities at amortised cost 69,898 - 69,898 - 69,898 Total non derivative financial liabilities 69,898 - 69,898 - 69,898
Net contractual cashflows (42,302) 18,374 (64,610) 3,934 (42,302)
30 June 2020 Carrying amount On demand Less than six months
Six to twelve months Total contractual cashflows
Non derivative financial assets
Cash
$(000) $(000) $(000) $(000) $(000)
41,962 4,462 37,500 - 41,962 Receivables 13,159 - 8,925 4,234 13,159
Total non derivative financial assets 55,121 4,462 46,425 4,234 55,121 Non derivative financial liabilities
Financial liabilities at amortised cost 59,067 - 59,067 - 59,067 Total non derivative financial liabilities 59,067 - 59,067 - 59,067
Net contractual cashflows (3,946) 4,462 (12,642) 4,234 (3,946)
The Company’s risk management policies identify and analyse the risks faced by the Company and set appropriate risk levels and controls to monitor those risks.
i. Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.
ii. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party, by failing to discharge an obligation. The Company is mainly exposed to credit risk from its financial assets, and the maximum exposure to credit risk at balance date is represented by the total amount of financial assets in the statement of financial position: • Cash and cash equivalents • Trade receivables The Company manages credit risk by analysing the credit worthiness of its customers, including external ratings if available. Deposits are placed with Bank of New Zealand and/or ANZ Bank New Zealand Limited, both with long-term AA- credit ratings by Standard & Poor's rating agency. Foreign exchange transactions are undertaken with financial institutions with a minimum long-term AA- credit rating by Standard & Poor’s rating agency.
iii. Liquidity risk
Liquidity risk is the risk that the Company will have difficulty meeting the obligations associated with its financial liabilities. CRL Ltd’s approach to managing liquidity is to ensure that it has sufficient liquidity to meet its liabilities when they are due. Funding will be made available upon request in a prescribed format from the shareholders of the Company and therefore the Company has no significant exposure to liquidity risk. The Company does not expect liquidity risk in regard to foreign exchange transactions as these are funding obligations the Company incurs and forecasts for as part of meeting expected project costs.
Contractual maturity analysis of derivative financial liabilities The table below analyses derivative financial instrument liabilities that are all gross settled derivatives into their relevant maturity groupings based on the remaining period at balance date to the contractual maturity date. The amounts disclosed are the undiscounted contractual cash flows.
30 June 2021 Liability carrying amount
Asset carrying amount Contractual cash flows
Less than six months
Six to twelve months
One to two years
Forward foreign exchange costs $(000) $(000) $(000) $(000) $(000) $(000) Outflow (500) - - (149) (225) (126) Inflow - 500 - 149 225 126
(500) 500 - - - -
30 June 2020 Liability carrying amount
Asset carrying amount Contractual cash flows
Less than six months
Six to twelve months
One to two years
Forward foreign exchange costs $(000) $(000) $(000) $(000) $(000) $(000) Outflow - - - - - Inflow - - - - - -
The notional principal amounts of outstanding forward foreign exchange contracts were NZ $24.8m (2020: $Nil). These foreign currencies include Euro (EUR), Australian (AUD), and United States (USD) dollars. The foreign currency principal amounts were EUR $11.6m (2020: $Nil), AUD $4m (2020: $Nil) and USD $0.6m (2020: $Nil). The fair values of forward foreign exchange contracts have been determined using a discounted cash flows valuation technique based on quoted market prices. The fair value is determined using independently sourced market currency rates based on forward foreign exchange contract prices at balance date valued on a mark-to-market basis. These foreign exchange derivatives have been determined to be within Level 2 of the fair value hierarchy as all significant inputs required to ascertain their fair value are observable.
iv. Counterparty risk
Counterparty risk is the likelihood or probability that one of those involved in a transaction might default on its contractual obligations. CRL Ltd has a number of key contractual counterparties. CRL Ltd receives financial information from and regularly monitor the financial creditworthiness of these counterparties to ensure there is no risk of disruption to the project and that those counterparties being able to continue to satisfy their current and future commitments under their contracts with CRL Ltd. In reviewing financial creditworthiness, CRL Ltd considers financial performance (including rating agency reports where available) of both the counterparty and as applicable their parent.
11. Sensitivity analysis
As CRL Ltd does not have a net exposure to a change in any of these currencies (EUR, AUD, and USD), at 30 June 2021 (and at 30 June 2020), if the NZD had weakened/strengthened against any of these currencies, with all variables held constant, there would be no impact on CRL Ltd’s deficit or surplus for the year.
12. Related parties
i. Key management personnel
Key management personnel include the senior management team and the Board of Directors.
Remuneration and benefits:
Senior management Directors
Number of personnel 30 June 2021 $(000) Number of personnel
30 June 2020 $(000)
12 4,008 10 3,495 5 294 5 294
4,302 3,789
Key management personnel did not receive any remuneration or compensation other than in their capacity as key management personnel. If the number of personnel were reported as FTE the number of Senior Managers would have been 11.9 FTE (2020: 10 FTE).
The Company did not provide any compensation at non-arm’s length terms to close family members of key management personnel during the year. The Company did not provide any loans to key management personnel or their close family members.
No Directors received compensation or other benefits in relation to cessation (2020: $Nil).
ii. Employment expenses
Salaries and wages KiwiSaver employer contributions Annual leave taken and other costs Other employment related costs
30 June 2021 30 June 2020 $(000) $(000)
1,025 1,403 262 245
1,662 1,673 222 277
3,171 3,598
CRL Ltd capitalises a portion of employment expenses and hence the employment expenses shown above are net of capitalisation.
Severance payments
No termination benefits relating to severance amounts were paid to employees in 2021 (2020: 1) as a result of reorganisation of the Company. The total termination amounts paid by the Company to employees was $0 (2020: $23k).
Redundancy payments
No termination benefits relating to redundancy amounts were paid in 2021 (2020: Nil) as a result of the reorganisation of the Company. The total redundancy amounts paid by CRL Ltd to employees was $0 (2020: $Nil).
iii. Related party transactions and balances
Related party transactions other than remuneration of key management personnel
All related party transactions that the Company entered into during the year occurred within normal client/supplier relationship and under terms equivalent to those that prevail in arm’s length transactions in similar circumstances.
CRL Ltd funded work by KiwiRail in relation to C8 Ōtāhuhu (track works), C5 Mt Eden Single Line Enabling Works (MESLEW), C8 Newmarket and C9 Britomart East. The terms of these agreements were on an arm's length commercial basis. CRL Ltd transferred two assets to Auckland Council during FY21. These assets were the balance of C2 (C2 SP2 was transferred in FY20) and C8 Ōtāhuhu Station Works.
Balances at year end 30 June 2021
Crown
Auckland Council
30 June 2020
Crown
Auckland Council
Due from Owed to
$(000) $(000)
- 31
- 31
5,020 146 5,020 146
13. Auditor's remuneration
30 June 2021 30 June 2020 $(000) $(000)
Audit New Zealand fees paid for the assurance audit of projects C3 and C7 - 3 Audit New Zealand fees paid for the audit of the financial statements - Current Year 254 245 Internal audit fees paid to PwC 100 -
354 248
The Office of the Auditor-General undertook a governance review of CRL Ltd over the course of 2020 and 2021. This work has not yet been completed. No costs have been incurred by CRL Ltd in the preparation of this report.
14. Capital management
CRL Ltd's capital is its equity, which comprises capital and accumulated surplus/(deficit). Equity is represented by net assets. CRL Ltd is subject to the financial management and accountability provisions of the Crown Entities Act 2004, which impose restrictions in relation to borrowings, acquisition of securities, issuing guarantees and indemnities, and the use of derivatives. CRL Ltd manages its equity by prudently managing revenues, expenses, assets, liabilities, investments and general financial dealings to ensure the company effectively achieves its objectives and purpose.
15. Subsequent events
CRL Ltd expects to complete the transfer of the C1 SP3 (Chief Post Office) and SP5 (Urban Realm) assets by 30 September 2021 or not long thereafter. These assets are to vest to Auckland Council and Auckland Transport. CRL Ltd also expects to complete in September 2021 the signing of a Funding Agreement with KiwiRail for the Stage 2a and 3a works related to C9 Britomart East. These works include track and civils, overhead line supply and installation and signalling works and equipment. In addition the CRL project has been impacted by the Covid-19 Level 4 lockdown announcement effective 11.59pm on 17 August 2021. This has caused a shutdown of works on all work sites with the exception of the limited operation of the Tunnel Boring Machine. It is too early to gauge the financial impact of this current lockdown. No adjustments have been made to the financial statements. On 3 September 2021, Transport Minister Michael Wood and Auckland Mayor Phil Goff announced that a new Targeted Hardship Fund will be established to help small businesses impacted by disruption from the construction of CRL. Additional funding of up to $12m will be provided from the Sponsors over the next two years. CRL Ltd will administer the fund with an independent third party assessor providing input and advice.
Statement of Financial Performance and Statement of Other Comprehensive Revenue and Expense
30 June 2021
Revenue
Rental revenue
Interest revenue
Other revenue
Total revenue Budget Actual Variance $(000) $(000) $(000)
163 123 (40) 490 472 (18) - 2,503 2,503
653 3,098 2,445
Expenditure
Employment expenses Professional services
IT expenses Third party works Capital expenditure write-offs General expenses Insurance expenses Credit losses and allowances
Lease payments Depreciation and amortisation expenses Vested asset expense Impairment expenses
Total expenditure Surplus/(deficit) Total comprehensive revenue and expense
4,123 3,171 952 640 571 69
586 125 461
23,536 14,111 9,425 - 484 (484) 4,298 3,971 327 7,514 8,682 (1,168)
196 67 129
3,408 5,728 (2,320) 11,004 43,910 (32,906) - 2,181 (2,181)
55,305 83,001 (27,696) (54,652) (79,903) (25,251) (54,652) (79,903) (25,251)
The Company’s net deficit was $25.3m higher than budgeted (2020: $103.2m). Expenses were higher than budgeted at $27.7m (2020: $103.8m). The major variance was (i) the unbudgeted transfer of the completed C2 Works (valued at $21.3m) to Auckland Council for further vesting to Auckland Transport and Healthy Waters and (ii) higher budget for non-construction third party works costs on C8 Ōtāhuhu and C5 MESLEW works reflected under third party works.
30 June 2021
Assets
Current Assets
Cash and cash equivalents Trade and other receivables
Assets held for transfer
FX hedging - receivables Prepayments
Total Current Assets
Non-Current Assets
Capital work in progress FX hedging - receivables Prepayments Property, plant and equipment Intangible assets
Total Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Accounts payable and accruals Current employee entitlements FX hedging - payables Related party payables
Total Current Liabilities
Non-current Liabilities
FX derivative liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed capital Retained earnings
Total Equity
Refer to same answer above.
Budget Actual Variance $(000) $(000) $(000)
7,619 18,374 10,755 13,321 9,319 (4,002) - 174,612 174,612 - 374 374
6,613 8,292 1,679 27,553 210,971 183,418
1,759,443 1,511,844 (247,599) - 126 126
25,113 24,555 (558) 133,909 130,415 (3,494) 176 189 13
1,918,641 1,667,129 (251,512) 1,946,194 1,878,100 (68,094)
81,117 69,867 11,250 798 903 (105) - 374 (374) - 31 (31)
81,915 71,175 10,740
- 126 126
- 126 126
81,915 71,301 10,614 1,864,279 1,806,799 (57,480)
2,090,280 2,058,280 (32,000) (226,001) (251,481) (25,480) 1,864,279 1,806,799 (57,480)
30 June 2021 Budget Actual Variance $(000) $(000) $(000)
Cash flows from operating activities
Cash received from customers
Cash paid to suppliers and employees Interest received
Net cash from operating activities
Cash flows from investing activities
Acquisition of capital work in progress Acquisition of property, plant and equipment Acquisition of intangibles
Net cash from investing activities
170 105 (65) (21,252) (39,818) (18,566) 490 472 (18)
(20,592) (39,241) (18,649)
(836,028) (774,011) 62,017 (2,941) (232) 2,709 (91) (104) (13)
(839,060) (774,347) 64,713
Cash flows from financing activities
Proceeds from issue of contributed capital
Net cash from financing activities
Net (decrease)/increase
Opening cash and cash equivalents
Closing cash
822,000 790,000 (32,000)
822,000 790,000 (32,000)
(37,652) (23,588) 14,064
45,271 41,962 (3,309)
7,619 18,374 10,755
Made up of:
Bank balances
Total cash
7,619 18,374 10,755
7,619 18,374 10,755
The Link Alliance spend during FY21 was approximately $40m lower than budgeted due to incorrect Christmas period work assumptions, timing of plant purchases and Covid-19 impact. The later than assumed commencement of the C9 Britomart East works was also a factor.
Equity is measured as the difference between total assets and total liabilities. Equity is classified into the following components: • Contributed capital (Ordinary shares) • Surplus/(deficit) • Funding received for B Class shares
Shares
Ordinary shares:
The initial shareholding for the creation of CRL Ltd comprised 1,000 Ordinary shares. Ordinary shares related to the initial set up of the company have voting rights attached but no par value. There have been no movements in Ordinary shares. The shareholding was split as per the table below.
B Class shares:
Shareholders receive 1 share for every dollar of funding received. Funding is applied for on a quarterly basis supported by future forecast cash requirements. All B Class shares are authorised, issued and fully paid. They have no voting rights attached.
Minister of Finance Minister of Transport Auckland Council Total number of shares
Ordinary shares 2021
Number of shares 255 255 490 1,000 Total value of shares ($000) 108,932 108,933 217,865
Total value of shares $(000)
435,730
B Class shares 2021
Shares issued 1 July 2020 208,137,561 208,137,561 416,275,122 832,550,244 832,550 Shares issued relating to prior year - - - - Shares issued during the year 197,500,000 197,500,000 395,000,000 790,000,000 790,000 Shares paid not yet issued - - - - Total B Class shares 30 June 2021 405,637,561 405,637,561 811,275,122 1,622,550,244 1,622,550
Total Contributed Capital 2021
Minister of Finance Minister of Transport Auckland Council Total number of shares
Ordinary shares 2020
Number of shares 255 255 490 1,000 Total value of shares ($000) 108,932 108,933 217,865
2,058,280
Total value of shares $(000)
435,730
B Class shares 2020
Shares issued 1 July 2019 79,137,561 79,137,561 158,275,122 316,550,244 316,550 Shares issued relating to prior year - - - - Shares issued during the year 129,000,000 129,000,000 258,000,000 516,000,000 516,000 Shares paid not yet issued - - - - Total B Class shares 30 June 2020 208,137,561 208,137,561 416,275,122 832,550,244 832,550
