In 2014 Natural Monopoly in Water Supply Suffered Loss of 886 Million Manats

By the end of 2014 JSC Azersu suffered damages in the amount of 886 million manats that was 162.6 million manats or 15.5% less than in the previous year.

According to the financial report confirmed by the June 24 audit report (Ernst & Young Holdings (CIS) BV), the revenues of the natural monopoly of water supply in Azerbaijan from the sale of water, sewerage system services and other services totaled 140 million 979 thousand manats, which is 4.5 % more than in 2013. The sales amounted to 87 million 991 thousand manats, decreasing by 5.6%. Thus, the company has gained a profit on sales in the amount of about 53 million AZN, 11.4 million AZN more than in the previous year.

At the same time, Azersu and its subsidiaries in the past year had administrative expenses in the amount of 29.8 million manats (-2.6%) and the cost of sales and distribution of water was 94.4 million manats (+9.7%). The depreciation of assets of the water company for the year amounted to 837.2 million manats.

Overall, the outstanding claims of Azersu, taking into account the year 2014, reached on first January 2015 to 4 billion 436 800 000 manats.

The repayment of debts by water users is unsatisfactory. As at 31 December 2014, debts of the population and the group "not people" were, respectively, 16.4 million and 52 million 765 thousand manats. JSC Azersu create a reserve in the amount of 59.5 million manats for impairment of these debts, since there is a risk of non-payment.

Last year, public investment (including loans under state guarantee) in the development of the water supply system amounted to 500.9 million manats. Thus, on January 1 of this year, state investment in JSC Azersu reached 3 billion 656.9 million manats.

On 31 December 2014 Azersu had debts to the state budget in the form of taxes (VAT) and other payments totaling 59.8 million manats. For the year, these debts increased by 20.6 million manats. In addition, the water company has debts of AZN 21.4 million to the State Social Protection Fund (SSPF). During 2014 the debt to the State Social Protection Fund increased by 15.3%.

Note that with the authorized capital of 400 million manats (100% of shares of Azersu are owned by the state), the capital of the company is negative in the amount of 355.4 million manats.

The auditors' report has been provided with the reservation, according to which, the current liabilities of the company exceed its current assets by 647.6 million mantas. Therefore, there is a "significant uncertainty of continuing its activities as a permanent establishment." ----08B