TABREED 06 FINANCING CORPORATION

(incorporated in the Cayman Islands with limited liability)

US$200,000,000
Trust Certificates due 2011
Issue Price 100.00 per cent.
The US$200,000,000 Trust Certificates due 2011 (the Certificates) will be issued by Tabreed 06 Financing Corporation
(the Issuer), a special purpose company incorporated in the Cayman Islands, and will be constituted by a declaration
of trust (Declaration of Trust) dated on or about 20 July 2006 (the Closing Date) entered into by, the Issuer, in its
capacity as trustee. Pursuant to the Declaration of Trust, the Issuer will declare that it will hold certain assets, primarily
consisting of machinery, equipment, certain investments, and rights under certain agreements, upon trust absolutely for
the holders of the Certificates pro rata according to the face amount of Certificates held by each Certificateholder (as
defined herein) in accordance with the Declaration of Trust and the terms and conditions of the Certificates.
On the 20th day of each January and July, or if any such day is not a Business Day (as defined herein) the following
Business Day, unless it would thereby fall into the next calendar month, in which event such day should be the
immediately preceding Business Day, commencing on the periodic distribution date falling in January 2007 (each, a
Periodic Distribution Date), Certificateholders can expect to receive, from proceeds received from and in respect of the
Trust Assets (as defined herein), a periodic distribution equal to 1.25 per cent. per annum (the Margin) plus LIBOR
(as defined herein) calculated on the outstanding face amount of the Certificates as at the beginning of the relevant
Return Accumulation Period (as defined herein) on an actual/360 basis. Payments on the Certificates will be made in
US dollars without deduction for or on account of any Cayman Islands and/or United Arab Emirates (UAE and/or
Emirates) withholding taxes and the Issuer will pay additional amounts if any such taxes are imposed as described
under Terms and Conditions of the Certificates Taxation.
The Certificates mature on 20 July 2011 (the Scheduled Dissolution Date) but may be redeemed before then subject to
certain conditions. The Certificates are subject to redemption in whole, at their face amount, at the option of the Issuer
in the event of certain changes relating to taxation. See Terms and Conditions of the Certificates Dissolution of
Trust.
The Certificates will constitute obligations of the Issuer. See Terms and Conditions of the Certificates Status Limited
Recourse.
Application has been made to the Financial Services Authority in its capacity as competent authority under the
Financial Services and Markets Act 2000 (the UK Listing Authority) for the Certificates to be admitted to the official
list of the UK Listing Authority (the Official List) and to the London Stock Exchange plc (the London Stock
Exchange) for such Certificates to be admitted to trading on the London Stock Exchanges Gilt Edged and Fixed
Interest Market (the Market). The Market is a regulated market for the purposes of the Investment Services Directive
93/22/EEC.
Investors should have regard to the factors described under the section headed Risk Factors in this Prospectus.
The Certificates are rated BBB-(Stable) by Standard & Poors Ratings Services, a division of The McGraw Hill
Companies, Inc. (Standard & Poors). A rating is not a recommendation to buy, sell or hold securities and may be
subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
The Certificates have not been, and will not be, registered under the U.S. Securities Act of 1933 (the Securities Act),
and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. Persons (as defined in Regulation S under the Securities Act (Regulation S)).
Delivery of the Certificates in book-entry form will be made on the Closing Date. The Certificates will be issued in
registered form in minimum denominations of US$100,000 and integral multiples of US$1,000 in excess thereof.
Certificates will be represented at all times by interests in a global registered certificate (the Global Certificate),
deposited on or about the Closing Date with HSBC Bank plc as common depositary (the Common Depositary) for
Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, societe anonyme (Clearstream, Luxembourg).
Interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records
maintained by Euroclear and Clearstream, Luxembourg. Definitive certificates evidencing holdings of interests in the
Certificates will only be issued in exchange for interests in the Global Certificate in certain limited circumstances
described herein.

Joint Bookrunners and Joint Lead Managers

CIMB

Dresdner Kleinwort
HSBC
Co-Manager
ABC Islamic Bank (E.C.)

The date of this Prospectus is 18 July 2006

This Prospectus comprises a prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the
Prospectus Directive) and for the purpose of giving information with regard to the Issuer, National
Central Cooling Company (Tabreed) PJSC (Tabreed), Tabreed and its subsidiaries and affiliates
taken as a whole (the Group) and the Certificates which is necessary to enable investors to make an
informed assessment of the assets and liabilities, financial position, profit and losses and prospects of
the Issuer, Tabreed and the Group. The Issuer and Tabreed accept responsibility for the information
contained in this document. To the best of their knowledge and belief (having taken all reasonable
care to ensure that such is the case), the information contained in this document is in accordance
with the facts and does not omit anything likely to affect the import of such information.
Neither the Issuer nor Tabreed has authorised the making or provision of any representation or
information regarding the Issuer and Tabreed or the Certificates other than as contained in this
Prospectus or as approved for such purpose by the Issuer and Tabreed. Any such representation or
information should not be relied upon as having been authorised by the Issuer and Tabreed or the
Managers (as defined under Subscription and Sale).
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Certificate shall in any
circumstances create any implication that there has been no adverse change, or any event reasonably
likely to involve any adverse change, in the condition (financial or otherwise) of Tabreed and the
Issuer since the date of this Prospectus.
This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer or the
Managers to subscribe or purchase, any of the Certificates. The distribution of this Prospectus and
the offering of the Certificates in certain jurisdictions may be restricted by law. Persons into whose
possession this Prospectus comes are required by the Issuer and the Managers to inform themselves
about and to observe any such restrictions. For a description of further restrictions on offers and
sales of Certificates and distribution of this Prospectus see Subscription and Sale.
No person is authorised to give any information or to make any representation not contained in this
Prospectus and any information or representation not so contained must not be relied upon as having
been authorised by or on behalf of the Issuer or the Managers. The delivery of this Prospectus at any
time does not imply that the information contained in it is correct as at any time subsequent to its
date.
The Managers have not separately verified the information contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility or liability
is accepted by the Managers or any of them as to the accuracy or completeness of the information
contained in this Prospectus or of any other information provided by the Issuer or Tabreed in
connection with the Certificates.
In this Prospectus, unless otherwise specified, references to UAE Dirham and AED are to the
lawful currency, for the time being, of the UAE and references to US dollars, USD or US$
are to the currency of the United States of America. The UAE Dirham has been officially pegged to
the US dollar since February 2002. The mid point between the official buying and selling for the
UAE Dirham is at a fixed rate of AED3.6725 = US$1.00. References to billions are to thousands
of millions.
Certain amounts included in this Prospectus have been subject to rounding adjustments. Accordingly,
figures shown as totals in certain tables may not be an exact arithmetic aggregation of the figures
that preceded them.
Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly,
figures shown for the same category presented in different tables may vary slightly and figures shown
as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
In connection with the issue of the Certificates, HSBC Bank plc (the Stabilising Manager) or any
person acting on behalf of the Stabilising Manager may over-allot Certificates (provided that the
aggregate face amount of Certificates allotted does not exceed 105 per cent. of the aggregate face
amount of the Certificates) or effect transactions with a view to supporting the market price of the
Certificates at a level higher than that which might otherwise prevail. However, there is no assurance
that the Stabilising Manager(s) (or any persons acting on behalf of the Stabilising Manager) will
undertake stabilisation action. Any stabilisation action may begin on or after the date on which
adequate public disclosure of the terms of the offer of the Certificates is made and, if begun, may be
ended at any time, but it must end no later than the earlier of 30 days after the Closing Date and 60
days after the date of the allotment of the Certificates.
2

Table of Contents
Page
STRUCTURE DIAGRAM AND CASHFLOWS .....................................................................................4
FORWARD-LOOKING STATEMENTS..................................................................................................6
OVERVIEW OF THE OFFERING...........................................................................................................7
RISK FACTORS.......................................................................................................................................18
TERMS AND CONDITIONS OF THE CERTIFICATES ....................................................................23
THE GLOBAL CERTIFICATE...............................................................................................................40
THE TRUST ASSETS ..............................................................................................................................42
USE OF PROCEEDS ...............................................................................................................................47
NATIONAL CENTRAL COOLING COMPANY (TABREED) PJSC .................................................48
TABREED 06 FINANCING CORPORATION .....................................................................................67
TAXATION ..............................................................................................................................................69
THE UNITED ARAB EMIRATES .........................................................................................................71
SUBSCRIPTION AND SALE..................................................................................................................74
GENERAL INFORMATION ..................................................................................................................77
FINANCIAL INFORMATION ...............................................................................................................78

STRUCTURE DIAGRAM AND CASHFLOWS

Structure Diagram
Tabreed as
Lessee

Tabreed as
Contractor
Rental
Amount

Tabreed as
Seller

Istisnaa
Amount

US$26,000,000
Istisnaa
Agreement

Security
Amount

Commodities

Tabreed 06
Financing
Corporation

Lease
Agreement

Purchase price of
commodities

Periodic
Distribution
Amounts

Declaration
of Trust
Proceeds

Undertaking to
Purchase
Commodities

Investors

Counterparty

Cash Flows
Set out below is a simplified description of the principal cash flows underlying the transaction. Potential
investors are referred to the terms and conditions of the Certificates and the detailed descriptions of the
relevant Transaction Documents set out elsewhere in this document for a fuller description of certain
cash flows and for an explanation of the meaning of certain capitalised terms used below:
Payments by the Certificateholders and the Issuer
On the Closing Date, the Certificateholders will pay the issue price in respect of the Certificates to the
Issuer and the Issuer will pay US$40,000,000 to Tabreed in respect of the sale and delivery of Plant
A to the Issuer by Tabreed and US$26,000,000 to Tabreed under a commodities purchase agreement
relating to the Commodities. The balance of the issue price will be invested on the Closing Date by
the Issuer, at the direction of Tabreed, in Authorised Investments.
On the first Periodic Distribution Date, the Issuer will sell the Commodities to the Counterparty and
pay the sale proceeds to Tabreed against delivery to the Issuer of Plant B.
The Issuer will fund subsequent instalments of the purchase price to be paid by it to Tabreed for
Plant C as and when due under the Istisnaa Agreement through the liquidation of Authorised
Investments.
Periodic Payments by Tabreed
On each Periodic Distribution Date, Tabreed will pay the Issuer (i) rental for the Plants leased to it
by the Issuer and (ii) for so long as it still has obligations to perform under the Istisnaa Agreement,
Security Amounts in respect of those obligations. Taken together, these amounts are intended to fund
the Periodic Distribution Amounts payable by the Issuer under the Certificates.
Dissolution Payments
On the Scheduled Dissolution Date, the Issuer will sell the Plants to Tabreed and the Exercise Price
paid by Tabreed is intended to fund the Dissolution Distribution Amount payable by the Issuer
under the Certificates.
The Trust may be dissolved prior to the Scheduled Dissolution Date for a range of reasons including
(i) default or the imposition of Taxes or (ii) the occurrence of a Total Loss Event. In the case of (i)
4

above, the Dissolution Distribution Amount will be funded through (a) the sale of Commodities to
the Counterparty on the first Periodic Distribution Date (if the early dissolution occurs prior to the
first Periodic Distribution Date), (b) the liquidation of any Authorised Investments held by the Issuer
and (c) the sale of all Delivered Plants. In the case of (ii) above, the Dissolution Distribution Amount
will be funded through (a) the proceeds of Insurances and (b) if such proceeds are insufficient, a
default payment by the Service Agent under the Service Agency Agreement.

FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements give the current expectations and projections of the management of
Tabreed relating to Tabreeds financial condition, results of operations, plans, objectives, future
performance and business. Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. These statements may include words such as anticipate,
estimate, expect, project, plan, intend, believe and other words and terms of similar
meaning in connection with any discussion of the timing or nature of future operating or financial
performance or other events.
These forward-looking statements are based on assumptions that the management of Tabreed have
made in light of their experience in the industry in which they operate, as well as their perceptions of
historical trends, current conditions, expected future developments and other facts which they believe
are appropriate under the circumstances. Potential investors should understand that these statements
are not guarantees of performance or results. They involve risks, uncertainties (some of which are
beyond the control of the management of Tabreed) and assumptions. Although the management of
Tabreed believe that these forward-looking statements are based on reasonable assumptions, potential
investors should be aware that many factors could affect Tabreeds actual financial condition or
results of operations and cause actual results to differ materially from those in the forward-looking
statements. These facts include, among other things, those discussed under the section headed Risk
Factors in this Prospectus.
Because of these factors, the management of Tabreed caution that potential investors should not
place undue reliance on any forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made. New risks and uncertainties arise from time to time,
and it is impossible to predict these events or how they may affect Tabreed. Except as required by
law, the management of Tabreed have no duty to, and do not intend to, update or revise the
forward-looking statements in this Prospectus after the date of this Prospectus.

OVERVIEW OF THE OFFERING

This following is an overview of the principal features of the Certificates, including a description of the
Trust Assets and the Transaction Documents. This summary does not contain all of the information that
potential investors should consider before investing in the Certificates. Potential investors should read the
entire Prospectus carefully, especially the risks of investing in the Certificates discussed under Risk
Factors.
Reference to a Condition is to a numbered condition of the Terms and Conditions of the
Certificates.
Certificateholders, by subscribing for or acquiring the Certificates, acknowledge that no recourse may be
had for the payment of any amount owing in respect of the Certificates against the Issuer in its capacity
as Trustee in any circumstances whatsoever or the Trust to the extent the Trust Assets have been
exhausted following which all obligations of the Issuer, as issuer and in its capacity as Trustee, and the
Trust shall be extinguished.
Certificateholders should note that through a combination of the Istisnaa Agreement, the Lease
Agreement and the Purchase Undertaking the ability of the Issuer to pay the amounts due in respect of
the Certificates will ultimately be dependent on Tabreed.
A description of Tabreed is included within this Prospectus under National Central Cooling Company
(Tabreed) PJSC below.
The Trust Assets, the Istisnaa Agreement, the Commodities Purchase Agreement, the Undertaking to
Purchase (Commodities), the Lease Agreement, the Service Agency Agreement, the Investment
Agreement, the Purchase Undertaking (each as detailed below) and the other Transaction Documents (as
detailed below) are described in more detail in the descriptions of the Parties and the Summary of the
Certificates below.
PARTIES
Issuer

Tabreed 06 Financing Corporation (the Issuer), a special purpose

company incorporated in the Cayman Islands under The
Companies Law (2004 Revision), which was incorporated on 7
June 2006 to participate in the transactions contemplated by the
Transaction Documents.

Ownership of the Issuer

The authorised share capital of the Issuer is US$1,000, of which

1,000 ordinary shares of par value of US$1.00 have each been
issued. The Issuers ordinary shares are owned by Walkers SPV
Limited, a regulated trust company in the Cayman Islands, whose
registered office is at Walker House, PO Box 908GT, Mary Street,
George Town, Grand Cayman, Cayman Islands.

Administration of the Issuer

The affairs of the Issuer are managed by Walkers SPV Limited (the
Issuer Administrator), who will provide, amongst other things,
certain administrative services for and on behalf of the Issuer
pursuant to the Corporate Services Agreement dated 20 July 2006
between, inter alia, the Issuer and the Issuer Administrator (the
Corporate Services Agreement).

Contractor

National Central Cooling Company (Tabreed) PJSC (the

Contractor), a public joint stock company incorporated in the
United Arab Emirates (trading under the commercial name of
Tabreed), will procure the construction, manufacturing and
delivery to the Issuer of the Plants (as defined below) pursuant to
the Istisnaa Agreement.

Lessee

Tabreed will lease the Delivered Plants (as defined below) from the
Issuer on the terms set out in the Lease Agreement for a period
commencing on the date of delivery of each Plant or part thereof
under the Istisnaa Agreement and terminating on the Scheduled
Dissolution Date unless the Certificates are redeemed earlier and
the Trust (as defined below) is dissolved as described herein.
7

Seller

Tabreed shall on the Closing Date sell to the Issuer a certain

quantity of palladium (the Commodities) for a price of
US$26,000,000 on the terms of the Commodities Purchase
Agreement (as defined below).

The Counterparty

HSBC Bank plc (the Counterparty) shall on the Closing Date

enter into the Undertaking to Purchase (Commodities) under which
it shall undertake to purchase the Commodities from the Issuer on
the first Periodic Distribution Date (for a brief description of HSBC
Bank plc see page 43).

Trustee

The Issuer will act as trustee (in such capacity, the Trustee, which
expression shall include the Delegate referred to below) in respect
of the Trust Assets for the benefit of the Certificateholders in
accordance with the Declaration of Trust. Pursuant to the
Declaration of Trust, the Trustee will hold the Trust Assets for
and on behalf of the Certificateholders. Under the Declaration of
Trust, the Trustee will unconditionally and irrevocably delegate
authority to HSBC Trustee (C.I.) Limited (the Delegate) to take
all necessary actions on its behalf should a Redemption Event (as
defined in the Declaration of Trust) occur.

Joint Lead Managers

CIMB (L) Limited, Dresdner Bank AG London Branch and HSBC

Bank plc.

Co-Manager

ABC Islamic Bank (E.C.)

Principal Paying Agent, Payment

Administrator, Calculation Agent
and Replacement Agent

HSBC Bank plc

Registrar and Transfer Agent

HSBC Bank plc

SUMMARY OF THE CERTIFICATES

Amount and title
US$200,000,000 Trust Certificates due 2011.
Closing Date

20 July 2006 or such other date as may be agreed by the Issuer,

Tabreed and the Joint Lead Managers.

Scheduled Dissolution Date

The Periodic Distribution Date falling in July 2011

Issue Price

100 per cent. of the aggregate face amount of the Certificates.

Status

Each Certificate evidences an undivided beneficial ownership

interest in the Trust Assets and will rank pari passu, without any
preference, with the other Certificates.

Periodic Distribution Dates

The 20th day of each January and July (each a Periodic

Distribution Date), or if any such day is not a Business Day the
following Business Day unless it would thereby fall into the next
calendar month, in which event such day shall be the immediately
preceding Business Day, commencing on the Periodic Distribution
Date falling in January 2007. Business Day means a day on which
commercial banks and foreign exchange markets settle payments
and are open for general business in Dubai, London and New
York.

Periodic Distributions

On each Periodic Distribution Date, Certificateholders will receive

from moneys received in respect of the Trust Assets, a periodic
distribution in an amount equal to the product of (a) LIBOR for
the related Return Accumulation Period (as defined below) plus the
Margin, (b) US$200,000,000 and (c) the actual number of days in
the related Return Accumulation Period divided by 360 (the
Periodic Distribution Amount). See Condition 7.
LIBOR means, for each Return Accumulation Period, the
London inter-bank offered rate for six-month US dollar deposits
determined in accordance with Condition 7.2.
8

Margin means 1.25 per cent. per annum.

Return Accumulation Period

The period from and including the Closing Date up to but

excluding the first Periodic Distribution Date and each successive
period from and including a Periodic Distribution Date up to but
excluding the next succeeding Periodic Distribution Date is a
Return Accumulation Period.

Redemption of Certificates and

Dissolution of Trust

Unless the Certificates are redeemed earlier (and the Trust is

dissolved after such redemption) following (i) the occurrence of a
Dissolution Event (as defined in Condition 12) or (ii) the imposition
of any Taxes (as defined below) permitting Tabreed to terminate
the Lease Agreement and/or the Istisnaa Agreement, as applicable,
or (iii) the failure by the Issuer to make timely payment to the
Contractor under the Istisnaa Agreement, or (iv) the occurrence of
a Total Loss Event (as defined below), the Certificates will be
redeemed on the Scheduled Dissolution Date at the Dissolution
Distribution Amount (as defined below) and the Trust will
thereafter be dissolved.
On the Closing Date, Tabreed will execute a Purchase Undertaking
(the Purchase Undertaking), pursuant to which Tabreed (in such
capacity, the Purchaser) will undertake irrevocably to purchase
from the Issuer the Assets (as defined below) at the Exercise Price
(as defined below) on the first to occur of:
(a)

the date specified by the Trustee to the Certificateholders in

accordance with Condition 12 for redemption of the
Certificates following a Dissolution Event;

(b)

the second Business Day after the date of a Termination

Notice given in accordance with Condition 9.5; or

(c)

the Scheduled Dissolution Date.

To the extent that not all Plants have been delivered to the Issuer
under the Istisnaa Agreement on such date, the Issuer shall be
entitled to retain the aggregate Security Amounts paid to it under
the Istisnaa Agreement (otherwise than if the event of default
under the Istisnaa Agreement was due to the negligence, default or
misconduct of the Issuer) and the Istisnaa Agreement shall
terminate.
Upon receipt of the Exercise Price from the Purchaser in
accordance with the terms of the Purchase Undertaking, such
amount, together with any other amounts received in respect of the
Trust Assets, will be applied to redeem the Certificates in
accordance with Condition 4.2 at the Dissolution Distribution
Amount.
To the extent that the Purchaser has not paid the Exercise Price by
the fifth Business Day following the date on which it should have
paid the Exercise Price, the Trustee shall be entitled, at its
discretion, to sell the Assets to any third party. The Purchaser
shall remain liable at all times to pay any shortfall between the
proceeds of any such sale and the Exercise Price.
Assets means each Plant delivered to the Issuer under the
Istisnaa Agreement.
Base Amount means (i) at any time prior to the first Periodic
Distribution Date, US$40,000,000, (ii) on or any time after the first
Periodic Distribution Date but before the Completion Date, the
aggregate of all amounts paid by the Issuer for all Delivered Plants
and (iii) at any time on or after the Completion Date,
US$200,000,000.
9

Completion Date means the date on which all Delivered Plants

have been constructed and/or manufactured and delivered to the
Issuer under the Istisnaa Agreement.
Dissolution Distribution Amount means, as of any date, the
aggregate face amount of the Certificates then outstanding plus
accrued and unpaid Periodic Distribution Amounts as of such date.
Exercise Price means the aggregate of (i) the Base Amount plus
(ii) Expenses, plus (iii) any amounts accrued under the Istisnaa
Agreement and/or the Lease Agreement prior to the Exercise Date,
plus (iv) at any time prior to the Completion Date, an amount
equivalent to any amounts that the Issuer has an obligation to
reimburse to the Contractor pursuant to clauses 4.2 and 4.3 of the
Istisnaa Agreement, plus (v) where payment of any amount cannot
be made without withholding or deduction for or on account of any
Taxes required by law, such additional amounts so that, upon
payment by the Issuer to the holders of the Certificates (after any
deduction or withholding by the Issuer on account of Taxes, if
applicable), the net amount received by such holders will be the full
amount due to such holders under the Conditions of the
Certificates as if no such deduction or withholding had been made.
Expenses means all outstanding expenses incurred by Tabreed (in
such capacity, the Service Agent) under the Service Agency
Agreement dated 20 July 2006 entered into between the Issuer and
the Service Agent (the Service Agency Agreement) (including but
not limited to plant ownership taxes) and required to be reimbursed
to the Service Agent under the Service Agency Agreement.
Payment Date means the date falling two Business Days prior to
the relevant Periodic Distribution Date provided that the last
Payment Date shall be the Periodic Distribution Date immediately
preceding the date of the Completion Notice (as defined in the
Istisnaa Agreement).
Payment Period means the period from and including a Period
Distribution Date to and excluding the immediately following
Periodic Distribution Date. The first Payment Period shall
commence on the Closing Date and end on but exclude the first
Periodic Distribution Date.
Plant means the construction works and/or equipment and/or
machinery that are to be delivered under the Istisnaa Agreement,
which are more fully described under The Trust Assets below.
Taxes means any taxes, levies, imposts, duties, fees, assessments
or other charges of whatever nature imposed by or on behalf of the
UAE, or any emirate therein, the Cayman Islands or any political
subdivision or any authority thereof or therein having the power to
tax, and all interest, penalties or similar liabilities with respect
hereto.
Redemption following a Dissolution
Event

The Dissolution Events are set forth in Condition 12. If a

Dissolution Event shall occur, the Trustee shall give notice of such
Dissolution Event to the Certificateholders in accordance with
Condition 15 with a request to such holders to indicate if they wish
the Trust to be dissolved. If so requested in writing by the holders
of at least 25 per cent. in aggregate face amount of the Certificates
then outstanding, or if so directed by an Extraordinary Resolution
(as defined in the Declaration of Trust) of the holders of
Certificates, the Trustee shall (subject in each case to being
indemnified to its satisfaction) or, if the Trustee so decides in its
discretion, may give notice to all the holders of the Certificates in
10

accordance with Condition 15 that the Certificates are to be

redeemed at the Dissolution Distribution Amount on the date
specified in such notice.
Redemption for Tax Reasons

If as a result of a change in law after the Closing Date, (a) Tabreed

would, on any subsequent Rental Payment Date (as defined under
the Lease Agreement) or Payment Date (as defined under the
Istisnaa Agreement), be required to pay additional amounts as
described in Condition 10, and such requirement cannot be avoided
by the use of reasonable measures available to Tabreed, or (b) the
Issuer would on any subsequent Periodic Distribution Date be
required to make a withholding or deduction in respect of amounts
payable by it under the Certificates, Tabreed may (having given not
less than 45 Business Days written notice prior to the next Rental
Payment Date (as defined under the Lease Agreement) or Payment
Date (as defined under the Istisnaa Agreement)) terminate the
Lease Agreement and, if applicable, the Istisnaa Agreement
whereupon, under the Purchase Undertaking, the Issuer may
require Tabreed to buy the Assets pursuant to the terms of the
Purchase Undertaking at the Exercise Price. In addition, and to the
extent that there are Plants or parts thereof which have not been
delivered under the Istisnaa Agreement, the Issuer shall be entitled
to retain the Security Amount and the Istisnaa Agreement shall be
terminated thereafter. The Trustee will then redeem the Certificates
at the Dissolution Distribution Amount on the Periodic
Distribution Date following receipt of the Exercise Price and the
Trust will thereafter be dissolved.
Security Amount means the amount of US$1,250,000 to be paid
on each Payment Date by Tabreed as security for its obligations
under the Istisnaa Agreement.

Redemption for Issuer Default

In the event that the Issuer does not pay to the Contractor the
instalments on the dates and in the manner described in the
Istisnaa Agreement, Tabreed may by notice to the Issuer at least 16
Business Days prior to the next Periodic Distribution Date request
termination of the Istisnaa Agreement whereupon the Istisnaa
Agreement and Lease Agreement shall terminate and the Issuer
may require Tabreed to buy the Assets pursuant to the terms of the
Purchase Undertaking at the Exercise Price. In addition, and to the
extent that there are Plants or parts thereof which have not been
delivered under the Istisnaa Agreement, the Issuer shall be entitled
to retain the Security Amount and the Istisnaa Agreement shall be
terminated thereafter. The Trustee will then redeem the Certificates
at the Dissolution Distribution Amount on the Periodic
Distribution Date following receipt of the Exercise Price and the
Trust will thereafter be dissolved.

Redemption Following Total Loss

Event

Following the occurrence of a Total Loss Event, if the proceeds of

any Insurances (as defined in the Service Agency Agreement)
received in respect of such Total Loss Event are less than the
applicable Base Amount, such an event shall constitute evidence
that the Service Agent has failed to perform its obligations to insure
under the Service Agency Agreement and shall therefore be liable to
pay to the Lessor an amount equivalent to the shortfall between
any amounts received from the insurers and the Exercise Price
unless the Service Agent proves otherwise. In addition, and to the
extent that there are Plants or parts thereof which have not been
delivered under the Istisnaa Agreement, the Issuer shall be entitled
to retain the aggregate Security Amounts paid to it under that
agreement (unless the termination is due to the default, negligence
11

or misconduct of the Issuer) and the Istisnaa Agreement shall be

terminated thereafter. The Trustee will then redeem the Certificates
at the Dissolution Distribution Amount following receipt of the
Exercise Price and the Trust will thereafter be dissolved.
Total Loss Event means (i) the total loss or destruction of, or
damage to the whole of, the Delivered Plants or any event or
occurrence that renders the whole of the Delivered Plants
permanently unfit for any economic use and the repair or
remedial work in respect thereof is uneconomical or (ii) the
compulsory acquisition, confiscation or expropriation of the whole
of the Delivered Plants.
Form and Delivery of the
Certificates

The Certificates will be issued in registered form and will be

represented by interests in the Global Certificate.
Definitive certificates evidencing holdings of Certificates will only
be issued in exchange for interests in the Global Certificate in
certain limited circumstances. See The Global Certificate.

Clearance and Settlement

Interests in the Global Certificate will be held in book entry form

through Euroclear and Clearstream, Luxembourg. Transfers within
Euroclear and Clearstream, Luxembourg will be in accordance with
the usual rules and operating procedures of the relevant clearance
system.

Denominations

The Certificates will be issued in minimum denominations of

US$100,000 and integral multiples of US$1,000 in excess thereof.

SUMMARY OF THE TRUST

The Trust and Trust Assets

Pursuant to the Declaration of Trust, the Issuer will declare that it

will hold the Trust Assets upon trust absolutely for the holders of
the Certificates pro rata according to the face amount of the
Certificates held by each Certificateholder in accordance with the
Declaration of Trust and the Conditions.
The Trust means the trust declared by the Issuer under the
Declaration of Trust.
The Trust Assets, comprise primarily (a) the investments in the
Plants to be manufactured and/or constructed under the Istisnaa
Agreement and any Plants or part thereof delivered from time to
time thereunder; (b) the Commodities, the Authorised Investments
and the Investment Amount; (c) all of the Issuers rights, title,
interest and benefit under the Transaction Documents; and (d) all
monies standing to the credit of the Transaction Account and the
Investment Account.
There is also provision for the possible substitution of items of
Plant from time to time by agreement between Tabreed and the
Issuer under the Lease Agreement and the Istisnaa Agreement (the
Substitution Provisions). Any items so substituted shall then
become Plants (or part thereof) for the purposes of the Conditions
and ascertaining the Trust Assets.

The Istisnaa Agreement

On the Closing Date the Issuer and the Contractor shall enter into
an Istisnaa and Sale Agreement (the Istisnaa Agreement) under
which the Issuer will pay to the Contractor, in consideration for the
construction, manufacturing and delivery of the Plants, a total
amount of US$200,000,000 (the Istisnaa Amount). The Istisnaa
Amount shall be payable in instalments. The first instalment of
US$40,000,000 shall be payable to the Contractor on the Closing
Date and an amount of US$26,000,000 (the Second Instalment)
shall be payable to the Contractor on the first Periodic Distribution
12

Date. The balance shall be payable to the Contractor in further

instalments in relation to any Plant (or part thereof) delivered, as
more fully set out in the Istisnaa Agreement.
Lease Agreement

Under the terms of a lease agreement to be entered into between the

Issuer as lessor (in such capacity as Lessor) and the Lessee (the
Lease Agreement) Tabreed undertakes to lease each Delivered
Plant under the Istisnaa Agreement from the date each such
Delivered Plant is delivered under the Istisnaa Agreement up to the
Scheduled Dissolution Date, unless the Lease Agreement is
terminated earlier.
Under the terms of the Lease Agreement, the Lessee agrees to use
the Delivered Plants at its own risk and to bear the entire risk of
loss of or damage to the Delivered Plants or any part thereof arising
from the negligent or improper usage or operation thereof by the
Lessee.
The Lessee shall, at its own cost and expense, be responsible for the
performance of all Ordinary Maintenance and Repair required by
the Delivered Plants. Ordinary Maintenance and Repair means all
repairs, replacements, acts and maintenance and upkeep works
required for the general usage and operation of the Delivered Plants
and to keep, repair, maintain and preserve the Delivered Plants in
good order and condition, and in compliance with such
maintenance, repair and upkeep standards and procedures
generally expected in the ordinary course of business.
The Lessor shall be responsible for the performance of all Major
Maintenance, and shall procure that the Service Agent, in
accordance with the terms and conditions set out in the Service
Agency Agreement, shall perform all Major Maintenance. Major
Maintenance means all repairs, replacements, acts and
maintenance required in respect of the Delivered Plant other than
Ordinary Maintenance and Repair.
The rental payments under the Lease Agreement (the Rentals)
will be an amount of:
(i)

in respect of each Rental Payment Date falling in the period

from and including the Closing Date up to and excluding the
Completion Date, the Rental Amount less the Security
Amount;

(ii)

in respect of the Rental Payment Date falling on the

Completion Date, the Rental Amount plus the aggregate of
all Security Amounts; and

(iii) in respect of all Rental Payment Dates falling in the period

from and excluding the Completion Date up to and including
the Scheduled Dissolution Date, the Rental Amount.
The Lessee will be obliged to pay Rentals to the Lessor on the
second Business Day before each Periodic Distribution Date.
Rental Amount means, in relation to each relevant Payment
Period, the amount calculated in accordance with the following
formula:
D
A 6 (L + M) 6 where
360
A is US$200,000,000
L is LIBOR
M is 1.25 per cent. per annum
D is the actual number of days in each Payment Period
13

Service Agency Agreement

Under the terms of the Service Agency Agreement, the Service

Agent will, inter alia, be responsible on behalf of the Issuer for the
performance of all Major Maintenance in respect of the Delivered
Plants and the procuring of insurance cover for all Delivered Plants
under the Lease Agreement.

Investment Agreement

Under the terms of the Investment Agreement, the Issuer will invest
the amount of US$134,000,000 from the proceeds of the
Certificates (the Investment Amount) (or any part thereof) in
Authorised Investments. The Trustee will liquidate Authorised
Investments from time to time to enable the Issuer to pay
instalments falling due under the Istisnaa Agreement.
Authorised Investments means Islamic capital protected deposits
with a bank or financial institution with a long-term issuer rating of
at least A- by Standard & Poors or the equivalent by any other
internationally recognised rating agency provided that the
maximum exposure to a single bank or financial institution shall
not exceed 80 per cent. of the total amount invested under the terms
of the Investment Agreement, all as further described in the
Investment Agreement.

Commodities Purchase Agreement

Under the terms of the Commodities Purchase Agreement the

Issuer shall pay US$26,000,000 from the proceeds of the issue of the
Certificates to Tabreed in consideration for the sale by Tabreed to
it of the Commodities.

Undertaking to Purchase
(Commodities)

Under the Undertaking to Purchase (Commodities), the

Counterparty undertakes to purchase the Commodities from the
Issuer on the first Periodic Distribution Date for an amount of
US$26,000,000 (the Purchase Price). Provided that a Dissolution
Event has not occurred, the Purchase Price received by the Issuer
will be used by the Issuer to pay Tabreed for additional Plants (or
any part thereof) delivered on such date pursuant to the terms of
Istisnaa Agreement.

Transaction Account

HSBC Bank plc will maintain and operate the account (the
Transaction Account) on behalf of the Issuer. Monies deriving
from the Trust Assets (other than the Authorised Investments) will
be paid into the Transaction Account and payments to be made to
holders of the Certificates will be made from funds standing to the
credit of the Transaction Account.

Investment Account

HSBC Bank plc will maintain and operate the Investment Account
on behalf of the Issuer. Monies deriving from the Authorised
Investments will be deposited into the Investment Account in
accordance with the terms of the Investment Agreement provided
that any such monies derived after the date on which a Dissolution
Event has occurred shall be deposited in the Transaction Account.

Priority of Distributions

On each Periodic Distribution Date, or on the date specified in

accordance with the Conditions for redemption of the Certificates,
(the Redemption Date), HSBC Bank plc (the Payment
Administrator) shall apply the monies standing to the credit of
the Transaction Account in the following order of priority:
(a)

first, to the Delegate in respect of all amounts owing to it

under the Transaction Documents in its capacity as Delegate;

(b)

second, to HSBC Bank plc (the Principal Paying Agent) for

application in or towards payment pari passu and rateably of
all Periodic Distribution Amounts due and unpaid;

(c)

third, only if such payment is made on the Redemption Date,

to the Principal Paying Agent in or towards payment pari
passu and rateably of the Dissolution Distribution Amount;
14

(d)

fourth, only if such payment is made on the Redemption

Date, to the Service Agent in or towards payment of all
outstanding Expenses and an incentive fee in an amount
equivalent to the Available Funds; and

(e)

fifth, only if such payment is made on the Redemption Date,

to the Issuer.

Available Funds means the amount (if any) remaining in the

Transaction Account after all holders of Certificates have been paid
the Dissolution Distribution Amount and provision is made for the
Issuer to be paid an amount of US$500.
Costs Undertaking

Pursuant to the Costs Undertaking (the Costs Undertaking) to be

executed by Tabreed, Tabreed will agree to pay certain fees and
expenses arising in connection with the issue of the Certificates and
under the Transaction Documents.

Limited Recourse

Each Certificate represents an undivided beneficial ownership

interest in the Trust Assets. Accordingly, the Certificateholders
will have no recourse to any assets of the Issuer, the Trustee, the
Agents or any affiliate of any of the foregoing entities in respect of
any shortfall in the expected amount from the Trust Assets.
Tabreed is obliged to make payments under the Transaction
Documents to which it is a party directly to the Issuer, and the
Issuer, as trustee for the benefit of the Certificateholders, will have
direct recourse against Tabreed to recover payments due to the
Issuer from Tabreed pursuant to the Transaction Documents to
which Tabreed is a party. In addition, and to the extent that
Tabreed does not fulfil its payment obligations under the Purchase
Undertaking, the Trustee may, in accordance with the Conditions
and the Declaration of Trust, exercise its right to sell the Assets to
third parties and, to the extent relevant, liquidate the Authorised
Investments.

Enforcement

Following the distribution of the proceeds of the Trust Assets in

respect of the Certificates to the Certificateholders in accordance
with the Conditions and the Declaration of Trust, the Trustee shall
not be liable for any further sums and, accordingly,
Certificateholders may not take any action against the Trustee to
recover any such sum or asset in respect of the Certificates or other
Trust Assets.
Under no circumstances shall the Trustee or any Certificateholder
have any right to cause the sale or other disposition of any of the
Trust Assets except pursuant to the Purchase Undertaking,
Undertaking to Purchase (Commodities) and the Declaration of
Trust and the sole right of the Trustee and the Certificateholders
against Tabreed shall be, if applicable, to enforce the obligation of
Tabreed to pay the Exercise Price thereunder. In addition, and to
the extent that Tabreed does not fulfil its payment obligations
under the Purchase Undertaking, the Trustee may, in accordance
with the Conditions and the Declaration of Trust, exercise its right
to sell the Assets to third parties and, to the extent relevant,
liquidate the Authorised Investments.
The Trustee shall not in any circumstances be obliged to take any
action against Tabreed under the Transaction Documents unless,
following the occurrence of a Dissolution Event, directed to do so
by the Certificateholders in accordance with the Conditions.
No Certificateholder shall be entitled to proceed directly against
Tabreed unless (i) the Trustee, having become bound so to proceed,
fails to do so within 30 days of becoming so bound and such failure
is continuing and (ii) the relevant Certificateholder (or such
15

Certificateholder together with the other Certificateholders who

propose to proceed directly against Tabreed) holds at least 25 per
cent. of the aggregate face amount of the Certificates then
outstanding.
The foregoing paragraphs are subject to the following. After
enforcing or realising such Trust Assets and distributing the net
proceeds in accordance with Condition 4.2, the obligations of the
Trustee in respect of the Certificates shall be satisfied and no holder
of the Certificates may take any further steps against the Trustee to
recover any further sums in respect of such Certificates and the
right to receive any such sums unpaid shall be extinguished.
Withholding Tax

All payments under the Transaction Documents shall be made

without withholding or deduction for, or on account of, any taxes,
levies, imposts, duties, fees, assessments or other charges of
whatever nature, imposed or levied by or on behalf of any
Relevant Jurisdiction (as defined in Condition 10), and all interest,
penalties or similar liabilities with respect thereto (Taxes), unless
the withholding or deduction of the Taxes is required by law. In
such event, (a) where Tabreed is required to make such a
withholding or deduction, Tabreed will be required, pursuant to
the relevant Transaction Document, to pay to the Issuer, and/or (b)
where the Issuer is required to make such a withholding or
deduction, the Issuer will be required to pay in respect of the
Certificates, additional amounts (which amounts will be applied
towards payments in respect of the Certificates) so that, subject to
certain exceptions, the full amount which otherwise would have
been due and payable under the Certificates is received by parties
entitled thereto. See Condition 10.

Use of Proceeds

The proceeds of the issue of the Certificates will be used by the

Issuer purchase and/or invest in Assets, Authorised Investments
and Commodities all in accordance with the terms of the
Transaction Documents.

Listing

Application has been made to the UK Listing Authority for the

Prospectus to be approved as a prospectus for the purposes of the
Prospectus Directive and for the Certificates to be admitted to the
Official List and to the London Stock Exchange for such
Certificates to be admitted to trading on the Market.

Certificateholders Meetings

A summary of the provisions for convening meetings of the

Certificateholders to consider matters relating to their interests as
such are set forth in Condition 16.

Transaction Documents

The Transaction Documents are the Certificate Purchase

Agreement, the Agency Agreement, the Declaration of Trust, the
Istisnaa Agreement, the Lease Agreement, the Purchase
Undertaking, the Service Agency Agreement, the Commodities
Purchase Agreement, the Undertaking to Purchase (Commodities),
the Costs Undertaking, the Investment Agreement, the Corporate
Services Agreement, the Certificates, and any other agreements and
documents delivered or executed in connection therewith (each as
defined in the Declaration of Trust).
16

Governing Law

The Declaration of Trust, the Agency Agreement, the Certificate

Purchase Agreement, the Commodities Purchase Agreement, the
Undertaking to Purchase (Commodities), the Costs Undertaking,
the Investment Agreement and the Certificates will be governed by
English law.
The Istisnaa Agreement, the Lease Agreement, the Purchase
Undertaking and the Service Agency Agreement will be governed
by the laws of the Emirate of Dubai and the federal law of the UAE
as applied in Dubai.
The Corporate Services Agreement will be governed by Cayman
Islands law.

17

RISK FACTORS
Prospective investors should consider carefully the risks set forth below and the other information
contained in this Prospectus prior to making any investment decision with respect to the Certificates.
Each of the risks highlighted below could have a material adverse effect on the business, operations,
financial condition or prospects of the Issuer and Tabreed, which, in turn, could have a material adverse
effect on the amounts which investors will receive in respect of the Certificates. In addition, each of the
risks highlighted below could adversely affect the trading price of the Certificates or the rights of
investors under the Certificates and, as a result, investors could lose some or all of their investment.
Prospective investors should note that the risks described below are not the only risks that the Issuer
and/or Tabreed faces. The Issuer and Tabreed have described only those risks relating to their operations
that they consider to be material. There may be additional risks that they currently consider not to be
material or of which they are not currently aware, and any of these risks could have the effects set forth
above.

Risk Factors relating to Tabreed

Customer Concentration of Tabreed
Tabreeds customer base is concentrated in one major customer, the UAE armed forces, which
currently accounts for approximately 84.4 per cent. of Tabreeds district cooling revenues. Although
the UAE armed forces is an entity of the investment grade rated UAE government, Tabreed remains
exposed to the risk of any future change in government policy on the use of district cooling systems
in military installations. Tabreeds reliance on one major customer is expected to remain the same
over the medium term, as its future projects now under consideration are mainly for the UAE armed
forces.
Contracts with the UAE Armed Forces
As mentioned above, much of Tabreeds district cooling revenue is derived from a master contract
with the UAE armed forces. If the UAE armed forces were to be in breach of this master contract or
were to take possession of a cooling plant sited on its land, it may in practice prove very difficult for
Tabreed to gain full compensation for its losses before the UAE courts, especially in light of the
sovereign status of the UAE armed forces and the factors described below relating to title to a
cooling plant which is or becomes affixed to land in the UAE.
Furthermore, Tabreeds master contract with the UAE armed forces provides for (i) the right for the
UAE armed forces to acquire the applicable plant at any time during the life of the master contract,
and (ii) for the contract to be terminable by the UAE armed forces at any time when it is considered
in the public interest to do so in the sole opinion of the UAE armed forces. It is unclear in such
circumstances whether the amount payable to Tabreed would amount to full or adequate
compensation for the loss of the master contract and, to the extent applicable, the plant itself.
Tabreeds master contract with the UAE armed forces also contains a provision which purports to
require Tabreed to take responsibility for all damage to the property of the UAE armed forces, or
any third party which takes place at the site of the plant, irrespective of whether the damage is
occasioned by or in relation to the operation of the plant. It is uncertain whether or not a UAE
court would interpret this as imposing strict liability on Tabreed for such incidents.
No Fixed Contracts with Utilities Suppliers
Tabreed does not have, nor will it be entering into for the foreseeable future, any fixed contract with
utilities suppliers except gas suppliers. As a result, changes in regulations and operations of the
utilities suppliers could all have a significant impact on profitability given the scale of consumption by
Tabreed of such utilities.
Corporate Disclosure and Accounting Standards
The reporting, accounting and financial practices applicable to UAE companies differ in certain
material respects from those applicable to similar companies in the United States and the United
Kingdom. There is less publicly available information regarding securities of listed UAE companies,
such as Tabreed, than is regularly published by public companies in the United States, the United
Kingdom and certain other more developed markets. However, Tabreed follows IFRS accounting
standards.
18

Legionnaires Disease
Tabreed is a user of wet cooling towers. In the past, such cooling towers have been a source of
legionnella bacteria which can cause Legionnaires disease. Whilst Tabreed mitigates this risk through
rigorous chemical control of the cooling water and insurance cover, an outbreak of Legionnaires
disease would impact the operations of the relevant plant which in turn would have an adverse effect
on cash flows relating to that plant. Whilst Legionnaires disease has been encountered at other
cooling plants in other parts of the world such as North America, no plants operated by Tabreed
have been affected to date.
Interest Rate Risk
Most of Tabreeds financings are floating rate exposures with the total amount of floating rate
exposure as at 31 December 2005 being AED676,000,000 out of a total exposure of
AED1,071,000,000. Whilst Tabreed has entered into a range of hedging instruments to mitigate this
risk, significant fluctuations in interest rates could adversely impact Tabreeds ability to service its
obligations under its financings.

Risk Factors relating to the Issuer

Dependancy on Tabreed
The Issuer is a newly established exempted limited company incorporated on 7 June 2006 and has no
operating history. The Issuer will not engage in any business activity other than the issuance of the
Certificates, the acquisition of the Trust Assets as described herein, acting in the capacity as Trustee
and other activities incidental or related to the foregoing as required under the Transaction
Documents.
The Issuers only material assets, which will be held on trust for the Certificateholders, are currently
the Trust Assets, including the obligation of Tabreed to make rental payments under the Lease
Agreement and to make other payments under the Purchase Undertaking and the Istisnaa
Agreement, to the Issuer in its capacity as Trustee. Therefore, the Issuer is subject to all the risks to
which Tabreed is subject, to the extent that such risks could limit Tabreeds ability to satisfy in full
and on a timely basis its obligations under the Lease Agreement, the Purchase Undertaking and the
Istisnaa Agreement. See Risk Factors relating to Tabreed above for a further description of certain
of these risks.
The ability of the Issuer to pay amounts due on the Certificates will primarily be dependent upon
receipt by the Issuer from Tabreed of all amounts due under the Istisnaa Agreement, the Lease
Agreement and the Purchase Undertaking and, to the extent that a Dissolution Event occurs prior to
the first Periodic Dissolution Date, the receipt of the Purchase Price from the Counterparty on the
first Periodic Distribution Date (which in aggregate may not be sufficient to meet all claims under the
Certificates and the Transaction Documents).
In the event that the Issuer is unable, on any Periodic Distribution Date, to pay the relevant Periodic
Distribution Amount in full, or following a Dissolution Event, to pay the Dissolution Distribution
Amount in full for failure of Tabreed to pay the Exercise Price, the Issuer shall be entitled to sell the
Assets to third parties, liquidate the Authorised Investments and to the extent that the Dissolution
Event occurs prior to the first Periodic Distribution Date, sell the Commodities to the Counterparty
on the first Periodic Distribution Date. The resulting amount may still not be sufficient to pay to the
Certificateholders the full Dissolution Distribution Amount. The Issuer will not have any other funds
available to meet its obligations under the Certificates. In particular, where the Dissolution Event
occurs prior to the first Periodic Distribution Date, the Purchase Price under the Undertaking to
Purchase (Commodities) will only be received by the Issuer on the first Periodic Distribution Date
and, therefore, Certificateholders may experience a delay in receiving any amounts in connection
therewith.
Limited Recourse Obligations
The Certificates will represent entitlement solely to the Trust Assets. Accordingly, recourse in respect
of the Certificates is limited to the Trust Assets and the proceeds of the Trust Assets are the sole
source of payments on the Certificates. The Certificateholders will have no recourse to any assets of
the Issuer, the Trustee, the Agents, the Managers or any of their affiliates in respect of any shortfall
in the expected amounts from the Trust Assets.
19

Also, Tabreed is obliged to make the payments under the relevant Transaction Documents directly to
the Trustee and the Trustee, will have direct recourse against Tabreed to recover payments due to the
Trustee, from Tabreed pursuant to such Transaction Documents.

Risk Factors relating to the Certificates

Plants Becoming fixed to the land
Under UAE law, as Tabreeds cooling plants are fixed to the land on which they are constructed,
these cooling plants are deemed to be an integral part of the land on which they are sited.
Accordingly, title to the applicable land includes title to the cooling plants which have no separate
rights of ownership.
As Tabreed does not generally own the land on which its cooling plants are constructed, Tabreed
only has contractual rights to use of the land on which the cooling plants are sited and, hence, to the
cooling plants themselves. Accordingly, Tabreed will not give any warranty relating to transfer of
construction work under the Istisnaa Agreement. Furthermore, Tabreed can only pass title to
machinery and equipment relating to each of the Plants whose construction is being financed by the
proceeds of the issue of the Certificates. Consequently, where Tabreed fails to pay the Exercise Price
under the Purchase Undertaking and, as a result, the Trustee exercises its right to sell the Assets to a
third party, the value of the machinery and equipment may be significantly lower than Exercise Price
and the Certificateholders may therefore receive less than they would otherwise expect to receive.
Tabreed shall remain liable under the Purchase Undertaking for the shortfall between the proceeds of
sale to third parties and the Exercise Price.
Liquidity of the Certificates
Application has been made to the UK Listing Authority for the Certificates to be admitted to the
Official List and to the London Stock Exchange to admit the Certificates for trading on the Market.
There can be no assurances that a secondary market for the Certificates will develop, or if a
secondary market does develop, that it will provide the Certificateholders with liquidity of investment
or that it will continue for the life of the Certificates. The market value of the Certificates may
fluctuate. Consequently, any sale of the Certificates by Certificateholders in any secondary market
that may develop may be at a discount from the original purchase price of such Certificates.
Counterparty risk
Pursuant to the Commodities Purchase Agreement, the Issuer will use certain of the proceeds of the
issue of the Certificates to acquire certain commodities from Tabreed. On the first Periodic
Distribution Date, it is intended that such commodities shall be sold by the Issuer to the
Counterparty pursuant to the Undertaking to Purchase (Commodities). In the event that the
Counterparty fails to comply with its obligations under the Undertaking to Purchase (Commodities),
such failure will result in the Issuer being unable to comply with its other obligations under the
Istisnaa Agreement. This gives Tabreed the right to trigger an Istisnaa Event of Default which will
result in the Certificates being redeemed earlier than the Scheduled Dissolution Date.
Consents to Variation of Transaction Documents and other Matters
The Declaration of Trust contains provisions permitting the Trustee, (acting on behalf of the
Certificateholders), from time to time and at any time without any consent or sanction of the
Certificateholders to make any modification to the Declaration of Trust if in the opinion of the
Trustee such modification (a) is of a formal, minor or technical nature, or (b) is made to correct a
manifest or proven error, or (c) is not materially prejudicial to the interest of Certificateholders.
Unless the Trustee otherwise decides, any such modification shall as soon as practicable thereafter be
notified to the Certificateholders and shall in any event be binding upon the Certificateholders.
Enforcing Foreign Judgments in Dubai
Under current UAE law, the courts are unlikely to enforce an English judgment without re-examining
the merits of the claim and may not observe the choice by the parties of English law as the
governing law of the relevant Transaction Documents and Certificates.
Judicial precedents in the UAE have no binding effect on subsequent decisions. In addition, court
decisions in the UAE are generally not recorded in publicly available reports. These factors create
greater judicial uncertainty.
20

Enforcement of Liabilities
Ultimately the payments under the Certificates are dependent upon Tabreed making payments to the
Issuer under the Lease Agreement, the Purchase Undertaking and the Istisnaa Agreement. If Tabreed
fails to do so, it may be necessary to bring an action against Tabreed to enforce its obligations
before the UAE courts which may be costly and time consuming.
Investment Agreement
Under the Investment Agreement the Issuer shall invest the Investment Amount in Authorised
Investments. There is a risk that the banks and financial institutions with whom the Investment
Amount (or part thereof) is deposited may fail to pay the Investment Amount (or part thereof) and
yields on it to the Issuer on a timely basis in order for the Issuer to meet its obligations to pay
Tabreed under the Istisnaa Agreement. This enables Tabreed to trigger an Istisnaa Event of Default
which will result in the Certificates being redeemed earlier in accordance with Condition 9.

Additional Risks
Suitability of Investment
The Certificates may not be a suitable investment for all investors.
Each potential investor in the Certificates must determine the suitability of that investment in light of
its own circumstances. In particular, each potential investor should:
(a) have sufficient knowledge and experience to make a meaningful evaluation of the Certificates,
the merits and risks of investing in the Certificates and the information contained in this
Prospectus;
(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Certificates and the impact the Certificates
will have on its overall investment portfolio;
(c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Certificates or where the currency for principal is different from the potential investors
currency;
(d) understand thoroughly the terms of the Certificates and be familiar with the behaviour of any
relevant indices and financial markets; and
(e) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic and other factors that may affect its investment and its ability to bear the applicable
risks.
Emerging Markets
Investors in emerging markets should be aware that these markets are subject to greater risks than
more developed markets, including in some cases significant legal, economic and political risks.
Accordingly, investors should exercise particular care in evaluating the risks involved and must decide
for themselves whether, in the light of those risks, their investment is appropriate. Generally,
investment in emerging markets is only suitable for sophisticated investors who fully appreciate the
significance of the risk involved.
Change of Law
The structure of the issue of the Certificates is based on English law, UAE law and administrative
practice in effect as at the date of this Prospectus. No assurance can be given as to the impact of any
possible change to English law, UAE law or administrative practice after the date of this Prospectus,
nor can any assurance be given as to whether any such change could adversely affect the ability of
the Issuer to make payments under the Certificates.
Political, Economic and Related Considerations
The UAE has seen significant economic growth and relative political stability. There can be no
assurance that such growth or stability will continue. Moreover, while the UAEs federal government
policies have generally resulted in improved economic performance, there can be no assurance that
such level of performance can be sustained. Tabreed may also be adversely affected generally by
political and economic developments in or affecting the UAE.
No assurance can be given that the UAE government will not implement regulations or fiscal or
monetary policies, including policies or new regulations or new legal interpretations of existing rates
21

or exchange controls, or otherwise take actions which could have a material adverse effect on the
Tabreeds business, financial condition, results of operations or prospects or which could adversely
affect the market price and liquidity of the Certificates.
The Issuer and/or Tabreed may be affected if there are regional, political or economic events that
prevent the Issuer and/or Tabreed from delivering their services. It is not possible to predict the
occurrence of such events or circumstances or the impact of such occurrences and no assurance can
be given that the Issuer and/or Tabreed would be able to fulfil their respective obligations if such
events or circumstances were to occur. A general UAE downturn or instability in certain sectors of
the UAE or regional economy could have an adverse effect on Tabreeds business, financial condition,
results of operations or prospects.

22

TERMS AND CONDITIONS OF THE CERTIFICATES

The following is the text of the Terms and Conditions of the Certificates which (subject to modification)
will be endorsed on each Certificate in definitive form (if issued):
Each of the US$200,000,000 Trust Certificates due 2011 (the Certificates) represents an undivided
beneficial ownership of the Trust Assets (defined in Condition 4.1 (The Trust Assets)) held on trust
(the Trust) for the holders of such Certificates pursuant to a declaration of trust (the Declaration
of Trust) dated 20 July 2006 made by Tabreed 06 Financing Corporation (the Issuer) in its
capacity as trustee (the Trustee), which expression shall include HSBC Trustee (C.I.) Limited as its
delegate (the Delegate).
Payments relating to the Certificates will be made pursuant to a Agency Agreement dated 20 July
2006 (the Agency Agreement) made among the Issuer, HSBC Bank plc as principal paying agent (in
such capacity, the Principal Paying Agent and, together with any further or other paying agents
appointed from time to time in respect of the Certificates, the Paying Agents), HSBC Bank plc as
calculation agent (in such capacity as the Calculation Agent), HSBC Bank plc as payment
administrator (in such capacity, the Payment Administrator), HSBC Bank plc as transfer agent (in
such capacity, the Transfer Agent and, together with any further or other transfer agents appointed
from time to time in respect of the Certificates, the Transfer Agents), HSBC Bank plc as
replacement agent (in such capacity, the Replacement Agent and, together with any further or other
replacement agents appointed from time to time in respect of the Certificates, the Replacement
Agents) and HSBC Bank plc as registrar (in such capacity, the Registrar).
The statements in these Conditions include summaries of, and are subject to, the detailed provisions
of the Transaction Documents (as defined in Condition 4.1 (The Trust Assets)). In these Conditions,
words and expressions defined and rules of construction and interpretation set out in the Declaration
of Trust shall, unless the context otherwise requires, have the same meanings herein. Copies of the
Transaction Documents are available for inspection by Certificateholders during normal business
hours at the principal office for the time being of the specified offices of the Principal Paying Agent.
The Certificateholders are entitled to the benefit of, are bound by, and are deemed to have notice of,
all the provisions of the Declaration of Trust and the Agency Agreement applicable to them.
Each initial Certificateholder, by its acquisition and holding of its interest in a Certificate, shall be
deemed to authorise and direct Tabreed 06 Financing Corporation to apply the sums paid to it in
respect of its Certificates to acquire the Assets (as defined in Condition 9.2) (Summary of Dissolution),
and to enter into each Transaction Document to which it is a party (whether in its capacity as Issuer
or Trustee), subject to the terms and conditions of the Declaration of Trust and these Conditions.

Form, Denomination and Title

1.1

Form and Denomination

The Certificates are issued in registered form in minimum denominations of US$100,000
and integral multiples of US$1,000 in excess thereof. A Certificate will be issued to each
Certificateholder in respect of its registered holding of Certificates. Each Certificate will be
numbered serially with an identifying number which will be recorded on the relevant Certificate
and in the Register (as defined in Condition 1.2 (Register).

1.2

Register
The Registrar will maintain a register (the Register) in respect of the Certificates in
accordance with the provisions of the Agency Agreement. In these Conditions,
Certificateholder and, in relation to a Certificate, holder means the person in whose name
such Certificate is from time to time registered in the Register (or, in the case of a joint holding,
the first named thereof).

1.3

Title
Title to the Certificates passes only by registration in the Register. The registered holder of any
Certificate will (except as otherwise required by law) be treated as its absolute owner for all
purposes (whether or not any payment thereon is overdue and regardless of any notice of
ownership, trust or any interest or any writing on, or the theft or loss of, the Certificate issued
in respect of it) and no person will be liable for so treating the Certificateholder. The holder of
23

a Certificate will be recognised by the Issuer as entitled to his Certificate free from any equity,
set-off or counterclaim on the part of the Issuer against the original or any intermediate holder
of such Certificate.

Transfers of Certificates and issue of certificates

2.1

Transfers
Subject to Conditions 2.4 (Closed Periods) and 2.5 (Regulations), a Certificate may be transferred
by depositing the Certificate, with the form of transfer on the back duly completed and signed,
at the specified office of any Transfer Agent.

2.2

Delivery of New Certificates

Each new Certificate to be issued upon transfer of Certificates will, within five business days of
receipt by the relevant Transfer Agent of the duly completed form of transfer endorsed on the
relevant Certificate, be mailed by uninsured mail at the risk of the holder entitled to the
Certificate to the address specified in the form of transfer. For the purposes of this Condition,
business day shall mean a day (other than a Saturday or Sunday) on which banks are open
for business in the city in which the specified office of the Transfer Agent with whom a
Certificate is deposited in connection with a transfer is located.
Where some but not all of the Certificates in respect of which a Certificate is issued are to be
transferred a new Certificate in respect of the Certificates not so transferred will, within five
business days of receipt by the relevant Transfer Agent of the original Certificate, be mailed by
uninsured mail at the risk of the holder of the Certificates not so transferred to the address of
such holder appearing on the register of Certificateholders or as specified in the form of
transfer.

2.3

Formalities Free of Charge

Registration of transfer of Certificates will be effected without charge by or on behalf of the
Issuer or any Transfer Agent but upon payment (or the giving of such indemnity as the Issuer
or any Transfer Agent may reasonably require) by the transferee in respect of any stamp duty,
tax or other governmental charges which may be imposed in relation to such transfer.

2.4

Closed Periods
No Certificateholder may require the transfer of a Certificate to be registered during the period
of seven days ending on the due date for any payment of the Dissolution Distribution Amount
(as defined in Condition 9.2 (Summary of Dissolution)) or any Periodic Distribution Amount (as
defined in Condition 7.1 (Periodic Distribution Dates)) on that Certificate.

2.5

Regulations
All transfers of Certificates and entries on the register of Certificateholders will be made subject
to the detailed regulations concerning transfer of Certificates scheduled to the Declaration of
Trust. A copy of the current regulations will be mailed (free of charge) by the Registrar to any
Certificateholder who requests one.
Among other things, such regulations require the following: The Issuer shall ensure that the
Registrar maintains the Register showing the amount of the outstanding Certificates (with each
Certificate bearing an identifying serial number), the issue dates and the names and addresses of
the holders of the Certificates. The Trustee and the holders of Certificates may inspect the
Register. The Certificates are transferable (in whole or in part) and the Certificates to be
transferred must be delivered for registration to the specified office of any Transfer Agent with
the form of transfer, which may be obtained from any Transfer Agent, endorsed and
accompanied by such other evidence as the Issuer may require to prove the title of the
transferor or his right to transfer the Certificates. The holder of Certificates shall be entitled to
receive in accordance with Condition 2.2 (Delivery of New Certificates) only one Certificate in
respect of his entire holding of such Certificates. In the case of a transfer of a portion of the
face amount of a Certificate, a new Certificate in respect of the balance of the Certificates not
transferred will be issued to the transferor in accordance with Condition 2.2 (Delivery of New
Certificates).
24

Status Limited Recourse

3.1

Status
Each Certificate evidences an undivided beneficial ownership of the Trust Assets and will rank
pari passu, without any preference, with the other Certificates.

3.2

Limited Recourse
Proceeds of the Trust Assets are the sole source of payments on the Certificates. Accordingly,
the Certificateholders will have no recourse to any assets of the Issuer, the Trustee or any of
their affiliates in respect of any shortfall in the expected amounts from the Trust Assets.
Tabreed is obliged to make the payments under the relevant Transaction Documents directly to
the Issuer, and the Issuer, as trustee for the benefit of the Certificateholders, will have direct
recourse against Tabreed to recover payments due to the Issuer from Tabreed pursuant to such
Transaction Documents, subject to the Issuers rights to sell all or part of the Assets to third
parties and to sell the Commodities to the Counterparty, in each case, in certain circumstances
as prescribed by these Conditions.
If, following distribution of the proceeds of the Trust Assets there remains a shortfall in
payments due under the Certificates, subject to Condition 13 (Enforcement and Exercise of
Rights), no Certificateholder will have any claim against the Issuer or its assets in respect of
such shortfall. In particular, no holder of Certificates will be able to petition for, or join any
other person in instituting proceedings for, the bankruptcy, liquidation, winding up or
receivership of the Issuer as a consequence of such shortfall or otherwise.

3.3

Agreement
It is a condition of the Certificates that:
3.3.1 Notwithstanding anything to the contrary contained herein or in any other Transaction
Document, no payment of any amount whatsoever shall be made by any of the Issuer, the
Trustee or the Trust or any of their respective agents on their behalf except to the extent
funds are available therefor from the Trust Assets and further agrees that no recourse shall
be had by any Certificateholder for the payment of any amount owing hereunder or under
any other Transaction Document, whether for the payment of any fee or other amount
hereunder or any other obligation or claim arising out of or based upon the Declaration
of Trust or any other Transaction Document, against any of the Issuer, the Trustee or the
Trust to the extent the Trust Assets have been exhausted following which all obligations of
the Issuer, the Trustee and the Trust shall be extinguished.
3.3.2 Notwithstanding anything to the contrary contained herein or in any Transaction
Document, prior to the date which is one year and one day after the date on which all
amounts owing by the Issuer under the Transaction Documents to which it is a party have
been paid in full, no Certificateholder may institute against, or join with any other person
in instituting against the Issuer, the Trustee or the Trust, any bankruptcy, liquidation,
winding up or receivership proceedings or other proceedings under any bankruptcy or
similar law.

Trust

4.1

The Trust Assets

Under an Istisnaa Agreement (the Istisnaa Agreement) dated 20 July 2006 between the Issuer
and National Central Cooling Company (Tabreed) PJSC (the Contractor), the Issuer shall
employ the Contractor to deliver certain construction works and/or equipment and/or machinery
(the Plants).
Under the Istisnaa Agreement, payments due to the Contractor shall be paid in instalments and
the amount due in respect of all instalments other than the first instalment and the amount to
be paid pursuant to the Commodities Purchase Agreement (defined below) is referred to as the
Investment Amount.
The Contractor shall, as security for its obligations under the Istisnaa Agreement, pay certain
cash amounts as determined under the Istisnaa Agreement (the Security Amount) on specified
dates into an account in the Issuers name (the Transaction Account).
25

Pursuant to a commodities purchase agreement (the Commodities Purchase Agreement) dated

20 July 2006 between the Issuer and National Central Cooling Company (Tabreed) PJSC
(Tabreed), the Issuer shall use part of the proceeds of the issue to purchase from the
Contractor certain commodities (the Commodities) for an amount equivalent to
US$26,000,000. On the first Periodic Distribution Date (as defined in Condition 7.1 (Periodic
Distribution Dates)), the Issuer shall sell the Commodities to HSBC Bank plc (the
Counterparty) pursuant to an undertaking to purchase (commodities) (the Undertaking to
Purchase (Commodities)) dated 20 July 2006 executed by the Counterparty.
In accordance with the terms of an investment agreement (the Investment Agreement) dated
20 July 2006 between, inter alia, the Issuer and Tabreed, the Investment Amount shall be
invested in certain investments (the Authorised Investments) pending the payment by the Issuer
of further instalments to Tabreed under the Istisnaa Agreement.
The Issuer, in its capacity as lessor (the Lessor), shall lease each item of Plant to Tabreed, in
its capacity as the lessee (the Lessee), upon completion of its construction and handover to
the Issuer pursuant to the terms of a lease agreement (the Lease Agreement) dated 20 July
2006 between the Lessor and the Lessee in return for which the Lessee will make periodic rental
payments to the Lessor. On or prior to the expiry of the lease of the Plants, Tabreed will
purchase the Plants from the Issuer in accordance with a purchase undertaking (the Purchase
Undertaking) dated 20 July 2006 executed by Tabreed.
Pursuant to the Declaration of Trust, the Issuer will declare that it will hold assets (the Trust
Assets) primarily consisting of (a) the investments in the Plants to be manufactured and/or
constructed under the Istisnaa Agreement and any Plants or part thereof delivered from time to
time thereunder; (b) any Authorised Investments, the Commodities and the Investment Amount;
(c) all of the Issuers rights, title, interest and benefit under the Transaction Documents; and (d)
all monies standing to the credit of the Transaction Account and the Investment Account, upon
trust absolutely for the holders of the Certificates pro rata according to the face amount of
Certificates held by each holder in accordance with the Declaration of Trust and these
Certificates.
The Istisnaa Agreement, the Agency Agreement, the Declaration of Trust, the Lease Agreement,
the Service Agency Agreement, the Purchase Undertaking, the Investment Agreement, the
Commodities Purchase Agreement, the Undertaking to Purchase (Commodities), the Corporate
Services Agreement, the Costs Undertaking, the Certificates and any other agreements and
documents delivered or execution in connection therewith are collectively referred to as the
Transaction Documents.
4.2

Application of Proceeds from Trust Assets

Pursuant to the Declaration of Trust, the Trustee holds the Trust Assets for and on behalf of
the holders of the Certificates. On each Periodic Distribution Date, or on any date specified by
the Trustee in accordance with Condition 9 (Dissolution of Trust) for redemption of the
Certificates (the Redemption Date), the Payment Administrator, notwithstanding any
instructions to the contrary from the Trustee, will apply the monies standing to the credit of the
Transaction Account in the following order of priority:
4.2.1 first, to the Delegate in respect of all amounts owing to it under the Transaction
Documents in its capacity as Delegate;
4.2.2 second, to the Principal Paying Agent for application in or towards payment pari passu
and rateably of all Periodic Distribution Amounts due and unpaid;
4.2.3 third, only if such payment is made on the Redemption Date, to the Principal Paying
Agent in or towards payment pari passu and rateably of the Dissolution Distribution
Amount;
4.2.4 fourth, only if such payment is made on the Redemption Date, to the Service Agent in or
towards payment of all outstanding Expenses (as defined in Condition 9.2 (Summary of
Dissolution)) and an incentive fee in an amount equivalent to the Available Funds; and
4.2.5 fifth, only if such payment is made on the Redemption Date, to the Issuer.
Available Funds means the amount (if any) remaining in the Transaction Account after all
holders of Certificates have been paid the Dissolution Distribution Amount and provision is
made for the Issuer to be paid an amount of US$500.
26

4.3

Late Payment Amounts Received

If the Issuer receives any amounts as late payment amounts under the Istisnaa Agreement,
Lease Agreement or the Purchase Undertaking then the Issuer will in each case pay this late
payment amount to the Red Crescent Society (or such other charity as may be nominated by
Tabreed) less any amounts for costs (but excluding cost of funding), expenses and losses actually
incurred by the Issuer as a result of Tabreeds failure to comply with its relevant payment
obligation which, for the avoidance of doubt, the Issuer may retain. The whole of such late
payment amounts will not, therefore, be available for distribution to Certificateholders.

4.4

Recourse to Trust Assets

Subject as set out in Condition 9 (Dissolution of Trust) and Condition 13 (Enforcement and
Exercise of Rights), the Certificateholders will not be entitled to request that the Trust be
dissolved or to institute proceedings directly against Tabreed. The Certificateholders shall have
recourse to the Trust Assets but access to these assets is limited as set forth in Condition 9
(Dissolution of Trust) and Condition 13 (Enforcement and Exercise of Rights). These assets may
be insufficient to fund expected distributions to Certificateholders and, taken as a whole, may
have a value less than that of the face amount of the Certificates. The Certificateholders will
have no recourse to any other assets of the Issuer or the Trustee.

Covenants of the Issuer

5.1

The Issuer has covenanted in the Declaration of Trust that, among other things, for so long as
any Certificate is outstanding:
5.1.1 the Issuer shall not sell, transfer, assign, participate, exchange or otherwise dispose of, or
pledge, mortgage, hypothecate or otherwise encumber (by security interest, lien (statutory
or otherwise), preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever or otherwise) (or permit such to occur or suffer such to
exist) any part of (i) its title to the Plants or any interest therein except pursuant to the
Transaction Documents and these Conditions or (ii) its interests in any of the other Trust
Assets except pursuant to the Transaction Documents;
5.1.2 the Issuer shall not exercise its option under the Purchase Undertaking except in its
capacity as Trustee; and
5.1.3 the Issuer shall not enter into any contract, transaction, amendment, obligation or liability
other than the Transaction Documents to which it is a party or as expressly permitted or
required thereunder or engage in any business or activity (including acting as trustee of
any other trust) other than:
(a)

as provided for or permitted in the Transaction Documents;

(b)

the ownership, management and disposal of the Trust Assets as provided in the
Transaction Documents; and

(c)

such other matters which are incidental thereto.

Covenants of Tabreed

6.1

Tabreed has covenanted in the Lease Agreement that, among other things, for so long as any
Certificate is outstanding:
6.1.1 it will not, and will procure that its Subsidiaries will not, create or permit to subsist any
Security Interest upon the whole or any part of its present or future undertaking, assets or
revenues (including uncalled capital) to secure any Relevant Indebtedness or Guarantee of
Relevant Indebtedness without (a) at the same time or prior thereto securing the
Certificates equally and rateably therewith to the satisfaction of the Delegate or (b)
providing such other security for the Certificates as the Delegate may in its absolute
discretion consider to be not materially less beneficial to the interests of the
Certificateholders or as may be approved by an Extraordinary Resolution (as defined in
the Declaration of Trust) of Certificateholders;
6.1.2 it shall not sell, transfer, assign, participate, exchange or otherwise dispose of, or pledge,
mortgage, hypothecate or otherwise encumber (by security interest, lien (statutory or
otherwise), preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever or otherwise) (or permit such to occur or suffer such to
27

exist) any part of (i) its title to the Plants or any interest therein except pursuant to the
Transaction Documents or (ii) its interests in any of the other Trust Assets except
pursuant to the Transaction Documents;
6.1.3 at the end of each Reference Date the ratio of EBITDA for the 12 months ending on such
Reference Date to Total Debt Service for the 12 months ending on such Reference Date
shall not be less than 1:1;
6.1.4 the ratio of Total Debt to Total Equity shall not at any time exceed 2.76:1; and
6.1.5 it shall not, and will procure that its Subsidiaries will not, enter into a single transaction
or a series of transactions (whether related or not) and whether voluntary or involuntary
to sell, lease, transfer or otherwise dispose of any part of its assets.
This Condition 6.1.5 does not apply to any sale, lease, transfer or other disposal:
(a)

at Fair Market Value;

(b)

undertaken by it or any such Subsidiary solely in connection with an Islamic compliant

financing;

(c)

made with the prior written consent of the Delegate;

(d)

in the course of solvent reorganisations of the Tabreed Group, to other members of the
Tabreed Group; or

(e)

for a book value which, if aggregated with the book value of assets disposed of (other
than under (a), (b), (c) or (d) above) in any one financial year, does not exceed
US$10,000,000.
For the purposes of this Condition:
EBITDA means in respect of the relevant period the net profits (after adding back
Expenses and any amounts in respect of provision for or an amount of depreciation and/or
amortisation for that period) of the Tabreed Group for that period.
Expenses means in respect of the relevant period any interest (including fluctuating rental
payments) and any other continuing, regular or periodic costs and expenses in the nature
of interest incurred by the Tabreed Group for that period in effecting, servicing or
maintaining any Financial Indebtedness.
Fair Market Value means, with respect to any asset or property, the sale value that
would be obtained in an arms length transaction between a willing seller and a willing
buyer in a transaction not involving distress or necessity of either party, as determined in
good faith by the board of directors of Tabreed or, as the case may be, the board of
directors of the relevant Subsidiary.
Financial Indebtedness means any indebtedness for or in respect of:
(a)

moneys borrowed:

(b)

any amount raised by acceptance under any acceptance credit facility;

(c)

any amount raised pursuant to any note purchase facility or the issue of bonds,
notes, debentures, loan stock or any similar instrument;

(d)

the amount of any liability in respect of any lease or hire purchase contract which
would, in accordance with International Financial Reporting Standards (IFRS), be
treated as a finance or capital lease;

(e)

receivables sold or discounted (other than any receivables to the extent they are sold
on a non-recourse basis);

(f)

any amount raised under any other transaction (including any forward sale or
purchase agreement) having the commercial effect of a borrowing;

(g)

any derivative transaction entered into in connection with protection against or

benefit from fluctuation in any rate or price (and, when calculating the value of any
derivative transaction, only the marked to market value shall be taken into account);

(h)

any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby

or documentary letter of credit or any other instrument issued by a bank or financial
institution; and
28

(i)

the amount of any liability in respect of any guarantee or indemnity for any of the
items referred to in paragraphs (a) to (h) above.

Guarantee means, in relation to any Indebtedness of any Person, any obligation of

another Person to pay such Indebtedness including (without limitation):
(a)

any obligation to purchase such Indebtedness;

(b)

any obligation to lend money, to purchase or subscribe shares or other securities or

to purchase assets or services in order to provide funds for the payment of such
Indebtedness;

(c)

any indemnity against the consequences of a default in the payment of such

Indebtedness; and

(d)

any other agreement to be responsible for such Indebtedness.

Indebtedness means any indebtedness of any Person for money borrowed or raised
including (without limitation) any indebtedness for or in respect of:
(a)

amounts raised by acceptance under any acceptance credit facility;

(b)

amounts raised under any note purchase facility;

(c)

the amount of any liability in respect of leases or hire purchase contracts which
would, in accordance with applicable law and IFRS, be treated as finance or capital
leases;

(d)

the amount of any liability in respect of any purchase price for assets or services the
payment of which is deferred for a period in excess of 60 days; and

(e)

amounts raised under any other transaction (including, without limitation, any
forward sale or purchase agreement) having the commercial effect of a borrowing.

Person means any individual, company, corporation, firm, partnership, joint venture,
association, organisation, state or agency of a state or other entity, whether or not having
separate legal personality.
Reference Date means 31 December in each year.
Relevant Indebtedness means any Indebtedness which is in the form of or represented by
any bond, note, debenture, debenture stock, loan stock, certificate or other instrument
which is, or is capable of being, listed, quoted or traded on any stock exchange or in any
securities market (including, without limitation, any over-the-counter market) but
excluding, for the avoidance of doubt, any Indebtedness incurred by way of bank loan.
Security Interest means any mortgage, charge, pledge, lien or other security interest
including, without limitation, anything analogous to any of the foregoing under the laws of
any jurisdiction.
Subsidiary means, in relation to any Person (the first Person) at any particular time,
any other Person (the second Person);
(a)

whose affairs and policies the first Person controls or has the power to control,
whether by ownership of share capital, contract, the power to appoint or remove
members of the governing body of the second Person or otherwise; or

(b)

whose financial statements are, in accordance with applicable law and IFRS,
consolidated with those of the first Person.

Tabreed Group means Tabreed and its Subsidiaries for the time being.
Total Debt means Financial Indebtedness of the Tabreed Group (but for this purpose
only excluding those items under paragraph (g) of the definition of Financial
Indebtedness).
Total Debt Service means, for the relevant period, the aggregate of:
(a)

interest expense paid during that period;

(b)

fluctuating rental payments and rental costs during that period; and

(c)

repayment instalments and fixed rental payments paid during that period (excluding
prepayments and any bond redemptions),

payable by the Tabreed Group.

29

Total Equity means the share capital of the Tabreed Group for the time being issued
and paid up or credited as paid up and the aggregate of the amounts standing to the
credit of the consolidated capital and revenue reserves (including share premium account,
statutory reserves and profit and loss account but excluding hedging reserves) of the
Tabreed Group.

Periodic Distributions

7.1

Periodic Distribution Dates

Subject as set out in Condition 4.2 (Application of Proceeds from Trust Assets) and Condition 9
(Dissolution of Trust), the Principal Paying Agent shall distribute to holders of the Certificates
pro rata, out of amounts transferred to the Transaction Account, a distribution in relation to
the Certificates on each Periodic Distribution Date equal to the applicable Periodic Distribution
Amount.
LIBOR means, for each Return Accumulation Period, the London inter-bank offered rate for
six-month US dollar deposits determined in accordance with Condition 7.2 (LIBOR
Determination).
Margin means 1.25 per cent. per annum.
Periodic Distribution Amount means for each Periodic Distribution Date, an amount equal to
the product of (i) LIBOR for the Return Accumulation Period immediately preceding such
Periodic Distribution Date plus the Margin, (ii) US$200,000,000 and (iii) the actual number of
days in such Return Accumulation Period divided by 360.
Periodic Distribution Date means the 20th day of January and July or if any such day is not
a Business Day the following Business Day unless it would thereby fall into the next calendar
month, in which event such day shall be the immediately preceding Business Day, commencing
on the Periodic Distribution Date falling in January 2007 to and including the Periodic
Distribution Date falling in July 2011.
The period from and including the Closing Date but excluding the first Periodic Distribution
Date and each successive period from and including a Periodic Distribution Date to but
excluding the next succeeding Periodic Distribution Date is called a Return Accumulation
Period.
In these Conditions, except where otherwise defined, Business Day means a day on which
commercial banks and foreign exchange markets settle payments and are open for general
business in Dubai, London and New York.

7.2

LIBOR Determination
LIBOR for each Return Accumulation Period shall be determined by or on behalf of the Issuer
in accordance with the following provisions:
(a)

on each LIBOR Determination Date, the Calculation Agent, on behalf of the Issuer, will
determine the Screen Rate at approximately 11.00 a.m. (London time) on such LIBOR
Determination Date and such Screen Rate shall be the value of LIBOR for the
forthcoming Return Accumulation Period;

(b)

if the Screen Rate is unavailable, the Calculation Agent shall request the principal London
office of each Reference Bank to provide it with the rate at which deposits in US dollars
are offered by it to prime banks in the London inter-bank market for a period of six
months at approximately 11.00 a.m. (London time) on such LIBOR Determination Date
and for a Representative Amount and, so long as at least two of the Reference Banks
provide such rates, the arithmetic mean of such rates (rounded if necessary to the fifth
decimal place, with 0.000005 rounded upwards) as calculated by the Calculation Agent
shall be the value of LIBOR for the forthcoming Return Accumulation Period;

(c)

if fewer than two of the Reference Banks provide rates, the value of LIBOR for the
forthcoming Return Accumulation Period shall be the arithmetic mean of the rates quoted
by such major banks in London as may be selected by the Calculation Agent at
approximately 11.00 a.m. (London time) on the first day of such Return Accumulation
Period for loans in US dollars to leading European banks for a period of six months
commencing on the first day of such Return Accumulation Period and for a Representative
Amount;
30

(d)

if LIBOR cannot be determined in accordance with the above provisions, the value of
LIBOR for the forthcoming Return Accumulation Period shall be as determined on the
preceding LIBOR Determination Date; and

(e)

the following terms used above have the meanings set forth below:
LIBOR Determination Date means the second London Business Day preceding the first
day of each Return Accumulation Period;
London Business Day means a day (other than a Saturday or a Sunday) on which
commercial banks in London are open for general business;
Reference Banks means the principal London office of each of four major banks engaged
in the London inter-bank market selected by or on behalf of the Issuer, provided that once
a Reference Bank has first been selected by the Issuer or its duly appointed representative,
such Reference Bank shall not be changed unless it ceases to be capable of acting as such;
Representative Amount means US$200,000,000; and
Screen Rate means the rate for six-month deposits in US dollars which appears on
Telerate page 3750 (or such replacement page on that service or any successor service
which displays the same information).

7.3

Notification of LIBOR and Periodic Distribution Amount

Following determination of each of LIBOR and the Periodic Distribution Amount for the
forthcoming Return Accumulation Period and the related Periodic Distribution Date by the
Calculation Agent, the Calculation Agent shall notify, or shall procure the notification to, each
stock exchange on which the Certificates are listed at the relevant time, as soon as practicable
after the determination thereof but in no event later than the first day of the relevant Return
Accumulation Period, details of such LIBOR and Periodic Distribution Amount. The Principal
Paying Agent shall arrange for such LIBOR and Periodic Distribution Amount to be published
in accordance with Condition 15 (Notices) as soon as practicable after their determination but in
no event later than the fourth London Business Day thereafter. Each Periodic Distribution
Amount and Periodic Distribution Date may subsequently be amended (or appropriate
alternative arrangements made by way of adjustment) without notice in the event of an
extension or shortening of the related Return Accumulation Period. In the event of any such
amendment, the Calculation Agent shall, as soon as practicable thereafter, notify each stock
exchange on which the Certificates are listed at the relevant time of the amended Periodic
Distribution Amount and Periodic Distribution Date. The Principal Paying Agent shall arrange
for such amended Periodic Distribution Amount and Periodic Distribution Date to be published
in accordance with Condition 15 (Notices) as soon as practicable after determination of such
amendment but in no event later than the fourth London Business Day thereafter.

7.4

Cessation of Accrual
No further amounts will be payable on any Certificate from and including its due date for
redemption.

7.5

Calculation of Distribution in respect of Broken Periodic Distribution Amounts

When a distribution is required to be calculated in respect of a period of less than a full Return
Accumulation Period, it shall be calculated on the basis of the actual number of days elapsed in
such period and an actual/360 basis.

Payment

8.1

Payments in Respect of Certificates

Payment of the Dissolution Distribution Amount and any Periodic Distribution Amount will be
made by the Principal Paying Agent by wire transfer in same day funds to the registered
account of each Certificateholder or by US dollar cheque drawn on a bank that processes
payments in US dollars mailed to the registered address of the Certificateholder if it does not
have a registered account. Payments of the Dissolution Distribution Amount and any Periodic
Distribution Amount due otherwise than on a Periodic Distribution Date will only be made
against surrender of the relevant Certificate at the specified office of any of the Paying Agents.
31

The Periodic Distribution Amount on Certificates due on a Periodic Distribution Date will be
paid to the holder shown on the register of Certificateholders at the close of business on the
date (the record date) being the seventh day before the relevant Periodic Distribution Date.
For the purposes of this Condition, a Certificateholders registered account means the US
dollar account maintained by or on behalf of it with a bank that processes payments in US
dollars, details of which appear on the Register at the close of business, in the case of the
Dissolution Distribution Amount and any Periodic Distribution Amount due otherwise than on
a Periodic Distribution Date, on the second Business Day before the due date for payment and,
in all other cases, on the relevant record date, and a Certificateholders registered address
means its address appearing on the Register at that time.
8.2

Payments Subject to Applicable Laws

Payments in respect of Certificates are subject in all cases to any fiscal or other laws and
regulations applicable in the place of payment, but without prejudice to the provisions of
Condition 10 (Taxation).

8.3

Payment only on a Business Day

Where payment is to be made by transfer to a registered account, payment instructions (for
value the due date or, if that is not a Payment Business Day, for value the first following day
which is a Payment Business Day) will be initiated and, where payment is to be made by
cheque, the cheque will be mailed, in each case by the Principal Paying Agent, on the Payment
Business Day preceding the due date for payment or, in the case of a payment of the
Dissolution Distribution Amount, if later, on the Payment Business Day on which the relevant
Certificate is surrendered at the specified office of a Paying Agent.
Certificateholders will not be entitled to any Periodic Distribution Amount or other payment for
any delay after the due date in receiving the amount due if the due date is not a Payment
Business Day, if the relevant Certificateholder is late in surrendering its Certificate (if required to
do so) or if a cheque mailed in accordance with this Condition arrives after the due date for
payment.
In this Condition, Payment Business Day means a day on which commercial banks in Dubai,
London and New York are open for general business and, in the case of presentation of a
Certificate, in the place in which the Certificate is presented.

8.4

Notifications to be Final
All notifications, opinions, determinations, certificates, calculations, quotations and decisions
given, expressed, made or obtained for the purposes of this Condition 8 (Payment), whether by
the Principal Paying Agent or the Calculation Agent, shall (in the absence of wilful default,
fraud or manifest error) be binding on the Issuer and all Certificateholders and (in the absence
of wilful default, fraud or manifest error) no liability to the Certificateholders shall attach to the
Principal Paying Agent or the Calculation Agent in connection with the exercise or non-exercise
by them or any of them of their powers duties and discretions under this Condition 8
(Payment).

8.5

Maintenance of Agents
The Issuer will at all times maintain a Registrar, a Calculation Agent and a Payment
Administrator and, for so long as the Certificates are listed on the Official List of the UK
Listing Authority, a Paying Agent in London. For so long as any Certificate is outstanding, the
Issuer undertakes that there will at all times be a Paying Agent located in an EU Member State
that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/
EC or any law implementing or complying with, or introduced in order to conform to, any such
Directive.
The Issuer reserves the right, at any time, to vary or terminate the appointment of any Paying
Agent and to appoint additional or other Paying Agents.
Notice of any change in any of the Paying Agents or in their specified offices shall promptly be
given to the Certificateholders in accordance with Condition 15 (Notices).
32

8.6

Agents act solely as agents of Issuer

In acting under the Agency Agreement and in connection with the Certificates, the Agents act
solely as agents of the Issuer and (to the extent provided therein) the Trustee and do not
assume any obligations towards or relationship of agency or trust for or with any of the
Certificateholders.

Dissolution of Trust

9.1

Scheduled Dissolution
Unless the Certificates are redeemed earlier (and the Trust is dissolved after such redemption)
following (i) the occurrence of a Dissolution Event; (ii) the occurrence of a change in
circumstances permitting Tabreed to terminate the Lease Agreement and/or the Istisnaa
Agreement; or (iii) the occurrence of a Total Loss Event (as defined below) the Certificates will
be redeemed on the Scheduled Dissolution Date at the Dissolution Distribution Amount and the
Trust will thereafter be dissolved.
The Scheduled Dissolution Date is the Periodic Distribution Date falling in July 2011.

9.2

Summary of Dissolution
Unless the Certificates are redeemed earlier (and the Trust is dissolved after such redemption)
following (i) the occurrence of a Dissolution Event (as defined in Condition 12 (Dissolution
Events) or (ii) the imposition of any Taxes (as defined in Condition 10 (Taxation) permitting
Tabreed to terminate the Lease Agreement and/or the Istisnaa Agreement, as applicable, or (iii)
the failure by the Issuer to make payment to Tabreed (as Contractor) under the Istisnaa
Agreement and Lease Agreement, or (iv) the occurrence of a Total Loss Event (as defined
below), the Certificates will be redeemed on the Scheduled Dissolution Date at the Dissolution
Distribution Amount and the Trust will thereafter be dissolved.
Pursuant to the Purchase Undertaking, Tabreed (in such capacity, the Purchaser) will
undertake irrevocably to purchase from the Issuer the Assets (as defined below) at the Exercise
Price (as defined below) on the first to occur of:
(a)

the date specified by the Trustee to the Certificateholders in accordance with Condition 12
(Dissolution Events) for redemption of the Certificates following a Dissolution Event;

(b)

the second Business Day after the date of a Termination Notice (as defined in Condition
9.5 (Dissolution following a Tax Event and/or Istisnaa Event of Default)); or

(c)

the Scheduled Dissolution Date.

To the extent that not all Plants have on such date been delivered to the Issuer under the
Istisnaa Agreement, the Istisnaa Agreement shall terminate and the Issuer shall be entitled to
retain the aggregate Security Amounts paid to it under the Istisnaa Agreement (otherwise than
if the event of default under the Istisnaa Agreement was due to the negligence, default or
misconduct of the Issuer).
Upon the occurrence of a Dissolution Event, the Trustee may, or if so requested in writing by
the holders of at least 25 per cent. in aggregate face amount of the Certificates then outstanding
or if so directed by an Extraordinary Resolution of the holders of Certificates shall, (i) exercise
the Issuers rights under the Purchase Undertaking by giving notice thereunder to Tabreed
requiring it to purchase all or part of the Assets and (ii) to the extent the Dissolution Event
occurs prior to the first Periodic Distribution Date, exercise the Issuers rights under the
Undertaking to Purchase (Commodities) by giving notice thereunder to the Counterparty
requiring it to purchase the Commodities on the first Periodic Distribution Date. To the extent
that the Purchaser has not paid the Exercise Price by the fifth Business Day following the date
on which it should have paid the Exercise Price, the Trustee shall be entitled at its discretion to
sell all or part of the Assets to such third party as the Trustee, in its sole discretion, may
determine and to terminate the Lease Agreement and the Istisnaa Agreement. Tabreed shall
remain liable under the Purchase Undertaking for the shortfall between the proceeds of any
such sale and the Exercise Price.
Upon receipt of the Exercise Price from Tabreed in accordance with the terms of the Purchase
Undertaking and/or any amounts payable under the Istisnaa Agreement, such amount, together
with Rental Amounts through to the date of the termination of the lease under the Lease
Agreement and, to the extent that the Dissolution Event occurs prior to the first Periodic
33

Distribution Date, the Purchase Price payable by the Counterparty under the Undertaking to
Purchase (Commodities), and the proceeds of liquidating the Authorised Investments, will be
applied to redeem the Certificates in accordance with Condition 4.2 (Application of Proceeds
from the Trust Assets) at the Dissolution Distribution Amount.
If the Assets are sold to a third party then the proceeds of such sale, together with the proceeds
of liquidating the Authorised Investments, shall be applied to redeem the Certificates in
accordance with Condition 4.2 (Application of Proceeds from the Trust Asset) at the Dissolution
Distribution Amount.
Assets means each Plant delivered to the Issuer.
Base Amount means (i) at any time prior to the first Periodic Distribution Date,
US$40,000,000, (ii) on or any time after the first Periodic Distribution Date but before the
Completion Date, the aggregate of all amounts paid by the Issuer for all Delivered Plants prior
to such date (iii) at any time on or after the Completion Date, US$200,000,000.
Completion Date means the date on which all Plants have been constructed and/or
manufactured and delivered to the Issuer under the Istisnaa Agreement.
Dissolution Distribution Amount means, as of any date, the aggregate face amount of the
Certificates then outstanding plus accrued and unpaid Periodic Distribution Amounts as of such
date.
Exercise Price means the aggregate of (i) the Base Amount plus (ii) Expenses, plus (iii) any
amounts accrued under the Istisnaa Agreement and/or the Lease Agreement prior to the
Exercise Date (as defined in the Declaration of Trust) prior to the Exercise Date, plus (iv) at
any time prior to the Completion Date, an amount equivalent to any amounts that the Issuer
has an obligation to reimburse to the Contractor pursuant clauses 4.2 and 4.3 of the Istisnaa
Agreement, plus (v) where payment of any amount cannot be made without withholding or
deduction for or on account of any Taxes required by law, such additional amounts so that,
upon payment by the Issuer to the holders of the Certificates (after any deduction or
withholding by the Issuer on account of Taxes, if applicable), the net amount received by such
holders will be the full amount due to such holders under the terms and conditions of the
Certificates as if no such deduction or withholding had been made.
Expenses means all outstanding expenses incurred by the Service Agent under the Service
Agency Agreement (including but not limited to plant ownership taxes) and required to be
reimbursed to the Service Agent under the Service Agency Agreement on the Redemption Date.
9.3

Dissolution Following a Dissolution Event

Upon the occurrence of a Dissolution Event, in accordance with Condition 12 (Dissolution
Events), the Certificates may be redeemed at the Dissolution Distribution Amount and the Trust
dissolved by the Trustee on the dates specified in Condition 12 (Dissolution Events).

9.4

Dissolution Following a Total Loss Event

Following the occurrence of a Total Loss Event, if the proceeds of any Insurances (as defined in
the Service Agency Agreement) received in respect of such Total Loss Event are less than the
applicable Base Amount, such an event shall constitute evidence that the Service Agent has
failed to perform its obligations to insure under the Service Agency Agreement and shall
therefore be liable to pay to the Lessor an amount equivalent to the shortfall between any
amounts received from the insurers and the Exercise Price unless the Service Agent proves
otherwise and to the extent that on such a date not all Plants have been delivered under the
Istisnaa Agreement, the Issuer may retain the Security Amount paid to it by Tabreed, unless
the termination was due to the default, negligence or misconduct of the Issuer, and the Istisnaa
Agreement shall terminate. The Trustee shall notify the Certificateholders upon the occurrence
of such a Total Loss Event in accordance with Condition 15, and upon receipt of such amount,
the Trustee will redeem the Certificates at the Dissolution Distribution Amount and the Trust
will thereafter be dissolved.
34

Total Loss Event means (i) the total loss or destruction of, or damage to the whole of, the
Delivered Plants or any event or occurrence that renders the whole of the Delivered Plants
permanently unfit for any economic use and the repair or remedial work in respect thereof is
uneconomical or (ii) the compulsory acquisition, confiscation or expropriation of the whole of
the Delivered Plants.
9.5

Dissolution Following a Change in Circumstances

Following a Change in Circumstances, whereupon Tabreed serves a notice (a Termination
Notice) on the Issuer to terminate the Lease Agreement and/or the Istisnaa Agent the Issuer
will have recourse to Tabreed under the Purchase Undertaking for an amount equivalent to the
Exercise Price and, under the Istisnaa Agreement, if applicable, it may retain the aggregate
Security Amounts paid to it. Upon receipt of such amount, and subject, in the case of event (ii)
in the definition of Change in Circumstances below, to the Issuer having given not less than 30
days nor more than 45 days notice to the Certificateholders, the Trustee will, upon receipt of
the amounts specified in this Condition 9.5, redeem the Certificates at the Dissolution
Distribution Amount on the Periodic Distribution Date specified in the relevant notice and the
Trust will thereafter be dissolved.
Change in Circumstances means a (i) change in law, at any time after the Closing Date, as a
result of which (a) Tabreed would on a subsequent Rental Payment Date (as defined in the
Lease Agreement) or Payment Date (as defined in the Istisnaa Agreement), as the case may be,
be required to pay an additional amount as described in Condition 10 (Taxation) and such
requirement cannot be avoided by the use of reasonable measures available to Tabreed or (b)
the Issuer would on a subsequent Periodic Distribution Date be required to make a withholding
or deduction in respect of amounts payable by it under the Certificates as described in
Condition 10 (Taxation), or (ii) the failure by the Issuer to make timely payment to the
Contractor in the currency and in the manner specified in the Istisnaa Agreement and such
default continues for a period of seven days.

9.6

Cancellations
All Certificates which are redeemed will forthwith be cancelled and accordingly may not be held,
reissued or resold.

10

Taxation

All payments by Tabreed under the Transaction Documents to which it is a party and the Issuer
under the Certificates shall be made without withholding or deduction for, or on account of, any
taxes, levies, imports, duties, fees, assessments or other charges of whatever nature, imposed or levied
by or on behalf of any Relevant Jurisdiction (as defined below), and all interest, penalties or similar
liabilities with respect thereto (Taxes), unless the withholding or deduction of the Taxes is required
by law. In such event, (a) where Tabreed is required to make such a withholding or deduction,
Tabreed will be required, pursuant to the relevant Transaction Document, to pay to the Issuer, and/
or (b) where the Issuer is required to make such a withholding or deduction, the Issuer will be
required to pay in respect of the Certificates, additional amounts (which amounts will be applied
towards payments in respect of the Certificates) so that the full amount which otherwise would have
been due and payable under the Certificates is received by the parties entitled thereto, except that no
such additional amount shall be payable to any Certificateholder:
(i)

who is liable for such Taxes in respect of such Certificate by reason of having some connection
with any Relevant Jurisdiction other than the mere holding of such Certificate;

(ii)

who would not be liable or subject to the withholding or deduction by making a declaration of
non-residence or other similar claim for exemption to the relevant tax authority;

(iii) who presented such Certificate for payment more than 30 days after the Relevant Date (as
defined in Condition 11 (Prescription)) except to the extent that a holder would have been
entitled to additional amounts on presenting the same for payment on the last day of the period
of 30 days assuming, whether or not such is in fact the case, that day to have been a Payment
Business Day;
(iv) where such withholding or deduction is imposed on a payment to an individual and is required
to be made pursuant to European Council Directive 2003/48/EC or any law implementing or
complying with, or introduced in order to conform to, such Directive; or
35

(v)

who would have been able to avoid such withholding or deduction by presenting the relevant
Certificate to another Paying Agent in a Member State of the European Union.
In these Conditions, Relevant Jurisdiction means the United Arab Emirates and each emirate
within the United Arab Emirates, the Cayman Islands and any political subdivision or any
authority of or in such jurisdiction having power to tax.

11

Prescription

Claims for payment in respect of the Certificates will become void unless presented for payment
within periods of ten years (in the case of Dissolution Distribution Amounts) and five years (in the
case of Periodic Distribution Amounts) from the Relevant Date in respect of the Certificates, subject
to the provisions of Condition 8 (Payment). In these Conditions, Relevant Date means the date on
which the payment first becomes due but, if the full amount of the money payable has not been
received by the Principal Paying Agent or the Trustee on or before the due date, it means the date
on which, the full amount of the money having been so received, notice to that effect shall have been
duly given to the Certificateholders by the Trustee in accordance with Condition 15 (Notices).

12

Dissolution Events

Upon the occurrence and continuation of any of the following events (Dissolution Events):
12.1 default is made in the payment of any Periodic Distribution Amount due in respect of any
Certificate and such default continues for a period of seven days; or
12.2 Tabreed fails duly to perform or comply with any of the material obligations expressed to be
assumed by it in the Transaction Documents to which it is a party and such failure, if capable
of remedy, is not remedied within 60 days after the Trustee has given notice thereof to Tabreed;
or
12.3 a Lease Event of Default occurs under and as defined in the Lease Agreement; or
12.4 Tabreed repudiates any Transaction Document to which it is a party or does or causes to be
done any act or thing evidencing an intention to repudiate any Transaction Document to which
it is a party; or
12.5 the Issuer repudiates any Transaction Document to which it is a party or does or causes to be
done any act or thing evidencing an intention to repudiate any Transaction Document to which
it is a party; or
12.6 at any time it is or will become unlawful for Tabreed to perform or comply with any or all of
its obligations under the Transaction Documents or any of the obligations of Tabreed under the
Transaction Documents are not or cease to be legal, valid, binding and enforceable; or
12.7 at any time it is or will become unlawful for the Issuer to perform or comply with any of its
obligations under the Transaction Documents or any of the obligations of the Issuer under the
Transaction Documents are not or cease to be legal, valid, binding and enforceable; or
12.8 an Istisnaa Event of Default occurs under and as defined in the Istisnaa Agreement,
the Trustee shall give notice of the occurrence of such Dissolution Event to the holders of
Certificates in accordance with Condition 15 (Notices) with a request to such holders to indicate
if they wish the Trust to be dissolved. If so requested in writing by the holders of at least 25
per cent. in aggregate face amount of such Certificates then outstanding or if so directed by an
Extraordinary Resolution of the holders of Certificates, the Trustee shall (subject in each case to
being indemnified to its satisfaction) or, if the Trustee so decides in its discretion, may give
notice to all the holders of Certificates in accordance with Condition 15 (Notices) that the
Certificates are to be redeemed at the Dissolution Distribution Amount on the date specified in
such notice and that the Trust is to be dissolved on the day after the last outstanding Certificate
has been redeemed.

13

Enforcement and Exercise of Rights

13.1 Following the distribution of the proceeds of the Trust Assets in respect of the Certificates to
the Certificateholders in accordance with these Conditions and the Declaration of Trust, the
Trustee shall not be liable for any further sums, and accordingly no Certificateholder may take
any action against the Trustee or any other person (other than Tabreed) to recover any such
sum in respect of the Certificates or Trust Assets.
36

13.2 The Trustee shall not be bound in any circumstances to take any action to enforce or to realise
the Trust Assets or take any action against Tabreed under any Transaction Document to which
Tabreed is a party or to sell any Trust Assets to another party other than Tabreed unless
directed or requested to do so (a) by an Extraordinary Resolution or (b) in writing by the
holders of at least 25 per cent. in aggregate face amount of the Certificates then outstanding
and, in each case, it is indemnified to its satisfaction.
13.3 No Certificateholder shall be entitled to proceed directly against the Issuer or Tabreed unless (i)
the Trustee, having become bound so to proceed, fails to do so within 30 days of becoming so
bound and such failure is continuing and (ii) the relevant Certificateholder (or such
Certificateholder together with the other Certificateholders who propose to proceed directly
against Tabreed) holds at least 25 per cent. of the aggregate face amount of the Certificates then
outstanding. Under no circumstances shall the Trustee or any Certificateholder have any right to
cause the sale or other disposition of any of the Trust Assets except pursuant to the Purchase
Undertaking or Condition 9.2 (Summary of Dissolution), and the sole right of the Trustee and
the Certificateholders against Tabreed shall be to enforce the obligation of Tabreed to pay the
Exercise Price under the Purchase Undertaking or the shortfall between the proceeds of sale of
Assets to third parties pursuant to Condition 9.2 (Summary of Dissolution) and the Exercise
Price.
13.4 Conditions 13.1, 13.2 and 13.3 are subject to this Condition 13.4. After distributing the net
proceeds of the Trust Assets in accordance with Condition 4.2 (Application of Proceeds from
Trust Assets), the obligations of the Trustee in respect of the Certificates shall be satisfied and
no holder of the Certificates may take any further steps against the Trustee to recover any
further sums in respect of the Certificates and the right to receive any such sums unpaid shall be
extinguished. In particular, no holder of the Certificates shall be entitled in respect thereof to
petition or to take any other steps for the winding-up of the Trustee nor shall any of them have
any claim in respect of the trust assets of any other trust established by the Trustee.

14

Replacement of Certificates

Should any Certificate be lost, stolen, mutilated, defaced or destroyed it may be replaced at the
specified offices of the Replacement Agents upon payment by the claimant of the expenses incurred in
connection with the replacement and on such terms as to evidence and indemnity as the Trustee may
reasonably require. Mutilated or defaced Certificates must be surrendered before replacements will be
issued.

15

Notices

15.1 All notices to the Certificateholders will be valid if:

15.1.1

published in a daily newspaper (which will be in a leading English language

newspaper having general circulation) in the Gulf region and a daily newspaper
having general circulation in London (which is expected to be the Financial Times)
approved by the Trustee; or

15.1.2

mailed to them by first class pre-paid registered mail (or its equivalent) or (if posted
to an overseas address) by air mail at their respective addresses in the Register, and,
in addition, for so long as the Certificates are listed on a stock exchange and the
rules of that stock exchange so require, such notice will be published in a daily
newspaper in the place or places required by those rules.

The Issuer shall also ensure that notices are duly given or published in a manner which complies with
the rules and regulations of any stock exchange on which the Certificates are for the time being
listed. Any notice shall be deemed to have been given on the seventh day after being so mailed or on
the date of publication or, if so published more than once or on different dates, on the date of the
first publication.

16

Meetings of Certificateholders, Modification, Waiver, Authorisation and Determination

16.1 The Declaration of Trust contains provisions for convening meetings of Certificateholders to
consider any matter affecting their interests, including the modification or abrogation by
Extraordinary Resolution of these Conditions or the provisions of the Declaration of Trust. The
quorum at any meeting for passing an Extraordinary Resolution will be two or more persons
present holding or representing more than two-thirds in aggregate face amount of the
37

Certificates for the time being outstanding, or at any adjourned such meeting two or more
persons present whatever the face amount of the Certificates held or represented by him or
them, except that any meeting the business of which includes the modification of certain
provisions of the Certificates (including modifying the Scheduled Dissolution Date, reducing or
cancelling any amount payable in respect of the Certificates or altering the currency of payment
of the Certificates or amending certain covenants given by Tabreed in the Lease Agreement and/
or given by the Issuer in the Declaration of Trust), the quorum shall be two or more persons
present holding or representing not less than 90 per cent. in aggregate face amount of the
Certificates for the time being outstanding, or at any adjourned such meeting two or more
persons present holding or representing not less than 90 per cent. in aggregate face amount of
the Certificates for the time being outstanding. An Extraordinary Resolution passed at any
meeting of the Certificateholders will be binding on all holders of the Certificates, whether or
not they are present at the meeting.
16.2 The Trustee may agree, with the consent of the Certificateholders (such consent to be given in
the manner described in Condition 16.1), to any modification of, or to the waiver or
authorisation of any breach or proposed breach of, any of these Conditions or any of the
provisions of the Declaration of Trust.
16.3 In connection with the exercise by it of any of its trusts, powers, authorities and discretions
(including, without limitation, any modification, waiver, authorisation or determination), the
Trustee shall have regard to the general interests of the Certificateholders as a class but shall
not have regard to any interests arising from circumstances particular to individual
Certificateholders (whatever their number) resulting from their being for any purpose domiciled
or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular
territory or any political sub-division thereof and the Trustee shall not be entitled to require,
nor shall any Certificateholder be entitled to claim, from the Trustee or any other person any
indemnification or payment in respect of any tax consequence of any such exercise upon
individual Certificateholders.
16.4 Any modification, abrogation, waiver, authorisation or determination shall be binding on the
Certificateholders and any modification, abrogation, waiver, authorisation or determination shall
be notified by the Trustee to the Certificateholders as soon as practicable thereafter in
accordance with Condition 15 (Notices).

17

Indemnification and Liability of the Trustee

17.1 The Declaration of Trust contains provisions for the indemnification of the Trustee in certain
circumstances and for its relief from responsibility. In particular, in connection with the exercise
of any of its rights in respect of the Trust Assets, the Trustee shall in no circumstances take any
action unless directed to do so in accordance with Condition 13.2, and then only if it shall have
been indemnified to its satisfaction.
17.2 The Trustee makes no representation and assumes no responsibility for the validity, sufficiency
or enforceability of the obligations of Tabreed under the Lease Agreement and/or the Istisnaa
Agreement and/or the Purchase Undertaking and shall not under any circumstances have any
liability or be obliged to account to the Certificateholders in respect of any amounts which
should have been made by Tabreed, but are not so made, and shall not in any circumstances
have any liability arising from the Trust Assets other than as expressly provided in these
Conditions or in the Declaration of Trust.
17.3 The Trustee is exempted from any liability in respect of any loss or theft of the Trust Assets or
any cash, from any obligation to insure the Trust Assets or any cash and from any claim
arising from the fact that the Trust Assets or any cash are held by or on behalf of the Trustee
or on deposit or in an account with any depositary or clearing system or are registered in the
name of the Trustee or its nominee, unless such loss or theft arises as a result of default or
misconduct of the Trustee.

18

Contracts (Rights of Third Parties) Act 1999

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to
enforce any term of these Conditions, but this does not affect any right or remedy of any person
which exists or is available apart from that Act.
38

19

Governing Law and Submission to Jurisdiction

The Declaration of Trust, the Agency Agreement and the Certificates are governed by, and will be
construed in accordance with, English law.
The Issuer has in the Declaration of Trust irrevocably and unconditionally agreed for the benefit of
the Trustee and the Certificateholders that the courts of England are to have non-exclusive
jurisdiction to settle any disputes which may arise out of or in connection with the Declaration of
Trust or the Certificates and that accordingly any suit, action or proceedings arising therefrom or in
connection therewith (together referred to as Proceedings) may be brought in the courts of
England.
The Issuer has in the Declaration of Trust irrevocably and unconditionally waived and agreed not to
raise any objection which it may have now or subsequently to the laying of the venue of any
Proceedings in the courts of England and any claim that any Proceedings have been brought in an
inconvenient forum and has further irrevocably and unconditionally agreed that a judgment in any
proceedings brought in the courts of England shall be conclusive and binding upon the Issuer and
may be enforced in the courts of any other jurisdiction. Nothing in this Condition shall limit any
right to take Proceedings against the Issuer in any other court of competent jurisdiction, nor shall the
taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
The Issuer has in the Declaration of Trust irrevocably and unconditionally appointed an agent for
service of process in England in respect of any Proceedings and has undertaken that in the event of
such agent ceasing so to act it will appoint such other person as the Trustee may approve as its agent
for that purpose. In the event that no such replacement agent for service of process in England has
been appointed by the Issuer within 14 days, the Trustee shall have the power to appoint, on behalf
of and at the expense of the Issuer, a replacement agent for service of process in England.

39

THE GLOBAL CERTIFICATE

The following is a summary of the provisions to be contained in the Global Certificate which will apply
to, and in some cases modify, the Terms and Conditions of the Certificates while the Certificates are
represented by the Global Certificate. Terms defined in the Conditions have the same meaning in the
paragraphs below.

Holders
For so long as all of the Certificates are represented by the Global Certificate and such Global
Certificate is held on behalf of Euroclear and Clearstream, Luxembourg, each person (other than
another clearing system) who is for the time being shown in the records of Euroclear or Clearstream,
Luxembourg (as the case may be) as the holder of a particular aggregate face amount of such
Certificates (each, a Holder) (in which regard any certificate or other document issued by Euroclear
or Clearstream, Luxembourg (as the case may be) as to the aggregate face amount of such
Certificates standing to the account of any person shall be conclusive and binding for all purposes)
shall be treated as the holder of such aggregate face amount of such Certificates (and the expression
Certificateholders and references to holding of Certificates and to holder of Certificates shall be
construed accordingly) for all purposes other than with respect to payments on such Certificates, the
right to which shall be vested, as against the Issuer and the Trustee solely in the Common Depositary
in accordance with and subject to the terms of the Global Certificate. Each Holder must look solely
to Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment made to
the Common Depositary.

Cancellation
Cancellation of any Certificate following its redemption by the Issuer will be effected by the reduction
in the aggregate face amount of the Certificates in the Register of Certificateholders and by the
annotation of the appropriate schedule to the Global Certificate.

Payments
Payments of the Dissolution Distribution Amount and any Periodic Distribution Amount in respect
of Certificates represented by the Global Certificate will be made upon presentation or, if no further
payment falls to be made in respect of the Certificate, against presentation and surrender of the
Global Certificate to or to the order of the Principal Paying Agent or such other Agents as shall have
been notified to the holder of the Global Certificate for such purpose.
Distributions of amounts with respect to book-entry interests in the Certificates held through
Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Principal Paying
Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with
the relevant systems rules and procedures.
A record of each payment made will be endorsed on the appropriate schedule to the Global
Certificate by or on behalf of the Registrar and shall be prima facie evidence that payment has been
made.

Notices
So long as all the Certificates are represented by the Global Certificate and such Global Certificate is
held on behalf of a clearing system, notices to Certificateholders may be given by delivery of the
relevant notice to the clearing system for communication by it to entitled Holders in substitution for
notification as required by the Conditions except that, so long as the Certificates are listed on any
stock exchange, notices shall also be published in accordance with the rules of such exchange. Any
such notice shall be deemed to have been given to the Certificateholders on the third day after the
day on which such notice is delivered to the relevant clearing systems.

Registration of Title
Registration of title to Certificates in a name other than that of the Common Depositary will not be
permitted, except as provided under Definitive Certificates below unless Euroclear or Clearstream,
Luxembourg, as appropriate, notifies the Issuer that it is unwilling or unable to continue as a clearing
system in connection with the Global Certificate, and in each case a successor clearing system
approved by the Trustee is not appointed by the Issuer within 90 days after receiving such notice
from Euroclear or Clearstream, Luxembourg. In these circumstances title to a Certificate may be
40

transferred into the names of holders notified by the Common Depositary in accordance with the
Conditions, except that Certificates in respect of Certificates so transferred may not be available until
21 days after the request for transfer is duly made.
The Registrar will not register title to the Certificate in a name other than that of the Common
Depositary for a period of seven calendar days preceding the due date for any payment of the
Dissolution Distribution Amount or Periodic Distribution Amount in respect of the Certificates.

Transfers
Transfers of book-entry interests in the Certificates will be effected through the records of Euroclear,
Clearstream, Luxembourg and their respective participants in accordance with the rules and
procedures of Euroclear, Clearstream, Luxembourg and their respective direct and indirect
participants.

Definitive Certificates
Interests in the Global Certificate will be exchangeable for Certificates in definitive form (Definitive
Certificates) upon the occurrence of an Exchange Event. For these purposes, Exchange Event
means that (i) a Dissolution Event has occurred and is continuing or (ii) the Issuer has been notified
that Euroclear or Clearstream, Luxembourg have been closed for business for a continuous period of
14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention
permanently to cease business or have in fact done so and no successor clearing system is available.
In any such event, the Issuer will issue Definitive Certificates (in exchange for the whole of the
Global Certificate) within 45 days of the relevant Exchange Event upon presentation of the Global
Certificate by the person in whose name the Global Certificate is registered in the Register at the
offices of the Principal Paying Agent on any day (other than a Saturday or Sunday) on which banks
are open for business in the city in which the Principal Paying Agent has its office.

41

THE TRUST ASSETS

Pursuant to the Declaration of Trust, the Issuer will declare that it will hold the Trust Assets upon
trust absolutely for the holders of the Certificates pro rata according to the face amount of the
Certificates held by each Certificateholder in accordance with the Declaration of Trust and the
Conditions.

Istisnaa Agreement
On the Closing Date the Issuer and the Contractor shall enter into an Istisnaa Agreement under
which the Issuer will pay, in consideration for the construction, manufacturing and delivery of the
Plants, a total amount of US$200,000,000 (the Istisnaa Amount). The Istisnaa Amount shall be
payable in instalments. The first instalment of US$40,000,000 shall be payable to the Contractor on
the Closing Date in connection with the handover of Plant A (as detailed below) and US$26,000,000
(the Second Instalment) shall be payable on the first Periodic Distribution Date in connection with
the handover of Plant B (as defined below). The balance shall be payable to the Contractor in one or
more further instalments in connection with delivery of appropriate certificates relating to the whole
or any part of Plant C (as detailed below).
On the Closing Date the Contractor shall deliver to the Issuer the construction works and/or
equipment and/or machinery forming part of each of the following Plants (Plant A) pursuant to the
Istisnaa Agreement:

Zayed Sports City Expansion ..............

Phoenix 1 & 2 Expansion ....................
Ajman-01 .............................................
Khalifa City-Abu Dhabi University
(phase 1) ..........................................
Ajman-02 (phase 1)..............................

Expected
Commissioning
Date

Installed
Capacity
(tons)

Notes

Jun-06
Jun-06
Sep-06

7,500
6,400
22,500

partial completion
partial completion
partial completion

Mar-07
Jan-07

10,000
12,000

partial completion
partial completion

On the first Periodic Distribution Date the Contractor shall deliver to the Issuer the construction
works and/or equipment and/or machinery forming part of each of the following Plants (Plant B)
pursuant to the Istisnaa Agreement:

Zayed Sports City Expansion .....

Phoenix 1 & 2 Expansion ...........
Ajman-01.....................................
Khalifa City-Abu Dhabi
University (phase 1)................
Ajman-02 (phase 1) .....................

Expected
Commissioning
Date

Installed
Capacity
(tons)

Notes

Jun-06
Jun-06
Sep-06

7,500
6,400
22,500

completion
completion
completion

Mar-07
Jan-07

10,000
12,000

additional completion
additional completion

Thereafter, the Contractor shall from time to time deliver to the Issuer the whole or any part of the
construction works and/or equipment and/or machinery forming part of any of the following Plants
(Plant C) pursuant to the Istisnaa Agreement:

Ajman-02 (phase 1) .................................................................

Khalifa City-Abu Dhabi University (phase 1)........................
Aldar 10 towers (phase 1) ....................................................
Aldar New Souk (phase 1)...................................................
Sheikh Zayed Road Plant 2 ....................................................
Dubai Metro (phase 1)............................................................

Expected
Commissioning
Date
Jan-07
Mar-07
Aug-06
Jan-07
Mar-07
Jul-07

Installed
Capacity
(tons)
12,000
10,000
10,000
10,000
12,000
20,000

As security for its obligations under the Istisnaa Agreement, the Contractor shall pay, on each
Payment Date during the Payment Period, an amount equivalent to the Security Amount to the
42

Issuer. Unless otherwise agreed, the aggregate amount payable to the Issuer under the Istisnaa
Agreement shall be repaid to the Contractor on the date on which all Plants have been delivered
under the Istisnaa Agreement. On the Closing Date, the Contractors payment obligations under the
Istisnaa Agreement will rank at least pari passu with the Contractors other unsecured,
unsubordinated and general obligations.

Commodities Purchase Agreement

Under the terms of the Commodities Purchase Agreement the Issuer shall purchase Commodities
from Tabreed on the Closing Date for an amount of US$26,000,000.

Undertaking to Purchase (Commodities)

Under the Undertaking to Purchase (Commodities), the Counterparty, being HSBC Bank plc,
undertakes to purchase the Commodities from the Issuer on the first Periodic Distribution Date.
HSBC Bank plc and its subsidiaries form a UK-based group providing a comprehensive range of
banking and related financial services.
HSBC Bank plc (formerly Midland Bank plc) was formed in England in 1836 and subsequently
incorporated as a limited company in 1880. In 1923, the company adopted the name of Midland
Bank Limited which it held until 1982 when it re-registered and changed its name to Midland Bank
plc.
During the year ended 31 December 1992, Midland Bank plc became a wholly owned subsidiary
undertaking of HSBC Holdings plc, whose Group Head Office is at 8 Canada Square, London E14
5HQ. HSBC Bank plc adopted its current name, changing from Midland Bank plc, in the year ended
31 December 1999.
The HSBC Group is one of the largest banking and financial services organisations in the world, with
around 9,500 offices in 76 countries and territories in five geographical regions: Europe; Hong Kong
the rest of Asia-Pacific, including the Middle East and Africa; North America and South America. Its
total assets at 31 December 2005 were 873 billion. HSBC Bank plc is the HSBC Groups principal
operating subsidiary undertaking in Europe.
The short-term unsecured obligations of HSBC Bank plc are currently rated P-1 by Moodys
Investors Service Limited, A-1+ by Standard & Poors and F1+ by Fitch Ratings Limited and the
long-term obligations of HSBC Bank plc are currently rated Aa2 by Moodys Investors Service
Limited, AA- by Standard & Poors and AA by Fitch Ratings Limited.
HSBC Bank plcs principal place of business in the United Kingdom is 8 Canada Square, London
E14 5HQ.

Lease Agreement
Under the terms of a Lease Agreement, between the Issuer as lessor and Tabreed as lessee, the Issuer
agrees to lease each Plant delivered (the Delivered Plants) to Tabreed for a term commencing from
the date on which each Delivered Plant is so delivered under the Istisnaa Agreement and extending
to the Scheduled Dissolution Date. Under the terms of the Lease Agreement, Tabreed agrees to use
the Delivered Plants at its own risk and to bear the entire risk of loss of or damage to the Delivered
Plants or any part thereof arising from the negligent or improper usage or operation thereof by
Tabreed. On the Closing Date, the Lessees payment obligations under the Lease Agreement will
rank at least pari passu with Lessees other unsecured, unsubordinated and general obligations.
Under the terms of the Lease Agreement, Tabreed shall, at its own cost and expense, be responsible
for the performance of all Ordinary Maintenance and Repair required of the Delivered Plants.
Ordinary Maintenance and Repair means all repairs, replacements, acts, and maintenance and
upkeep works required for the general usage and operation of the Delivered Plants and to keep,
repair, maintain and preserve the Delivered Plants in good order and condition, and in compliance
with such maintenance, repair and upkeep standards and procedures generally expected in the
ordinary course of business.
Under the terms of the Lease Agreement, the Issuer will be responsible for the performance of all
Major Maintenance, and shall procure that the Service Agent, in accordance with the terms and
conditions set out in the Service Agency Agreement, shall perform all Major Maintenance in respect
of the Delivered Plants. Major Maintenance means all repairs, replacements, acts and maintenance
required in respect of the Delivered Plants other than Ordinary Maintenance and Repair.
43

Under the Lease Agreement Tabreed has undertaken that:

(i)

it will not, and will procure that its Subsidiaries will not, create or permit to subsist any
Security Interest upon the whole or any part of its present or future undertaking, assets or
revenues (including uncalled capital) to secure any Relevant Indebtedness or Guarantee of
Relevant Indebtedness without (a) at the same time or prior thereto securing the Certificates
equally and rateably therewith to the satisfaction of the Delegate or (b) providing such other
security for the Certificates as the Delegate may in its absolute discretion consider to be not
materially less beneficial to the interest of the Certificateholders or as may be approved by an
Extraordinary Resolution of Certificateholders;

(ii)

it shall not sell, transfer, assign, participate, exchange or otherwise dispose of, or pledge,
mortgage, hypothecate or otherwise encumber (by security interest, lien (statutory or otherwise),
preference, priority or other security agreement or preferential arrangement of any kind or
nature whatsoever or otherwise) (or permit such to occur or suffer such to exist) any part of (i)
its title to the Plants or any interest therein except pursuant to the Transaction Documents or
(ii) its interests in any of the other Trust Assets except pursuant to the Transaction Documents;

(iii) at the end of each Reference Date the ratio of EBITDA for the 12 months ending on such
Reference Date to Total Debt Service for the 12 months ending on such Reference Date shall
not be less than 1:1;
(iv) the ratio of Total Debt to Total Equity shall not at any time exceed 2.76:1; and
(v)

it shall not, and will procure that its Subsidiaries will not, enter into a single transaction or a
series of transactions (whether related or not) and whether voluntary or involuntary to sell,
lease, transfer or otherwise dispose of any part of its assets.
This sub-Clause (v) does not apply to any sale, lease, transfer or other disposal:
(a)

at Fair Market Value;

(b)

undertaken by it or any such Subsidiary solely in connection with an Islamic compliant

financing;

(c)

made with the prior written consent of the Delegate;

(d)

in the course of solvent reorganisations of the Tabreed Group, to other members of the
Tabreed Group; or

(e)

for a book value which, if aggregated with the book value of assets disposed of (other
than under (a), (b), (c) or (d) above) in any one financial year, does not exceed
US$10,000,000.

Capitalised terms defined in this paragraph are defined in Condition 6.1.

The rental payments under the Lease Agreement will be payable by Tabreed on each Rental Payment
Date (being two Business Days prior to the related Periodic Distribution Date). The Rentals will be
an amount of:
(i)

in respect of each Rental Payment Date falling in the period from and including the Closing
Date up to and excluding the Completion Date, the Rental Amount less the Security Amount;

(ii)

in respect of the Rental Payment Date falling on the Completion Date, the Rental Amount plus
the aggregate of Security Amounts received under the Istisnaa Agreement; and

(iii) in respect of all Rental Payment Dates falling in the period from and excluding the Completion
Date up to and including the Scheduled Dissolution Date, the Rental Amount.
Rental Amount means, in relation to each relevant Payment Period, the amount calculated in
accordance with the following formula:
A 6 (L + M) 6

D
where
360

A is US$200,000,000
L is LIBOR
M is 1.25 per cent. per annum
D is the actual number of days in each Payment Period
44

Under the Lease Agreement, if Tabreed fails to pay a Rental or any other amount to the Issuer when
due, then Tabreed will be required to pay to the Issuer, from the date such amount became due until
the date of full settlement thereof, a daily late payment amount equal to the then-current Rental
divided by the number of actual days in the then-current rental period. If the Issuer receives such late
payment amounts, it must pay such late payment amounts to the Red Crescent Society (or such other
charity as may be nominated by Tabreed) a charity once the Issuer has deducted any amounts for
costs (but excluding cost of funding), expenses and losses actually incurred by the Issuer as a result of
Tabreeds failure to comply with its relevant payment obligations under this Agreement which
amounts the Issuer may, for the avoidance of doubt, retain.
Upon the occurrence of a Total Loss Event, the Lease Agreement will automatically be terminated
and the liability of Tabreed to pay the Rentals will cease.
Under the Lease Agreement, if:
(i)

Tabreed shall default, for a period of seven days or more, in the payment of any of the sums
whatsoever payable under the Lease Agreement;

(ii)

Tabreed shall fail to observe or perform any of the provisions of the Lease Agreement, whether
express or implied, and such failure shall continue for a period of 60 days or more after written
notice of such default shall have been given by the Lessor;

(iii) (a) any other present or future indebtedness of Tabreed or any of its Subsidiaries for or in
respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by
reason of any actual or potential default, event of default or the like (howsoever described), or
(b) any such indebtedness is not paid when due or, as the case may be, within any applicable
grace period, or (c) Tabreed or any of its Subsidiaries fails to pay when due any amount
payable by it under any present or future guarantee for, or indemnity in respect of, any moneys
borrowed or raised provided that the aggregate amount of the relevant indebtedness, guarantees
and indemnities in respect of which one or more of the events mentioned above in this
paragraph (iii) have occurred equals or exceeds U.S.$10,000,000 or its equivalent (as reasonably
determined by the Trustee);
(iv) Tabreed shall (a) be unable to pay its debts generally as they become due, (b) apply for or
consent to the appointment of, or the taking of possession by, a receiver, statutory manager,
administrator, examiner, custodian, trustee, liquidator or the like (in any jurisdiction) of itself or
of all or a substantial part of its assets, (c) make a general assignment for the benefit of, or a
composition or arrangement with, its creditors, (d) be adjudicated or declared by any competent
authority to be bankrupt or insolvent and such adjudication or declaration is not set aside
within 21 days, (e) file or acquiesce in the filing of, or fail to have dismissed or withdrawn, any
petition filed against it in an involuntary case under any such laws, or (f) file a petition seeking
to take advantage of any other law relating to bankruptcy, suspension of payments, insolvency,
re-organisation, liquidation, winding up or composition or adjustment of debts or take any
action for the purpose of effecting any of the foregoing in this paragraph (iv);
(v)

an order, judgment or decree shall be entered by any court of competent jurisdiction (a) for the
liquidation, re-organisation, dissolution, winding up of, or composition or readjustment of the
debts of, Tabreed (otherwise than for the purpose of a solvent reconstruction or amalgamation
approved by any court of competent jurisdiction or any other competent authority), (b)
appointing a trustee, statutory manager, receiver, administrator, examiner, custodian, liquidator
or the like (in any jurisdiction) of Tabreed or of all or any substantial part of Tabreeds assets,
or (c) granting relief in respect of Tabreed under any law providing for the relief of debtors;

(vi) an action or administrative proceeding of any court or agency which would have a material
adverse effect on the ability of Tabreed to perform any of its obligations under the Lease
Agreement or any of the Transaction Documents to which it is a party has been started; or
(vii) a Dissolution Event occurs,
then, in such event, the Issuer may, without prejudice to any other right or remedy the Issuer may
have under the Lease Agreement, the Transaction Documents or the law by written notice terminate
the Lease Agreement.
Investment Agreement
Under the terms of the Investment Agreement, the Issuer will invest the Investment Amount (or any
part thereof) from time to time in certain investments. The Issuer will liquidate Authorised
45

Investments (or part thereof) from time to time to enable it to pay instalments falling due under the
Istisnaa Agreement.
Service Agency Agreement
Under the terms of the Service Agency Agreement, the Service Agent will, inter alia, be responsible
on behalf of the Issuer for the performance of all Major Maintenance in respect of the Delivered
Plants, payment of plant ownership taxes and the procuring of insurances in accordance with good
industry practices as of the Closing Date.
Following the occurrence of a Total Loss Event, if the proceeds of any insurances received in respect
of such Total Loss Event are less than the applicable Base Amount, such event shall constitute
evidence that the Service Agent has failed to perform its obligations to insure under this Agreement
and shall therefore be liable to pay to the Lessor an amount equivalent to the shortfall between any
amounts received from the insurers and the Exercise Price payable under the Purchase Undertaking
unless the Service Agent proves otherwise.
Tax Gross-up
All payments by Tabreed, or the Issuer, as the case may be, under the Transaction Documents or in
respect of the Certificates are to be made without withholding or deduction for or on account of
Taxes, unless the withholding or deduction of Taxes is required by law. In such event, (a) where
Tabreed is required to make such a withholding or deduction, Tabreed will be required, pursuant to
the relevant Transaction Document to pay to the Issuer, and/or (b) where the Issuer is required to
make such a withholding or deduction, the Issuer will be required to pay in respect of the
Certificates, such additional amounts so that (i) the Issuer will receive the full amount which
otherwise would have been due and payable under the relevant agreement or deed and (ii) the
Certificateholders will receive the full amount which otherwise would have been due and payable
under the Certificates.

46

USE OF PROCEEDS
The proceeds of the issue of the Certificates, being US$200,000,000, will be used by the Issuer to
purchase and/or invest in Assets, Authorised Investments and Commodities all in accordance with the
terms of the Transaction Documents.

47

NATIONAL CENTRAL COOLING COMPANY (TABREED) PJSC

Overview
National Central Cooling Company (Tabreed) PJSC (hereafter referred to as Tabreed or the
Company) is one of the leading suppliers of district cooling services in the United Arab Emirates
(the UAE). Tabreed designs, engineers, finances, constructs and operates district cooling facilities
that supply chilled water for air conditioning. Tabreed currently operates 19 district cooling plants (of
which it owns 17) in the UAE from which it sells chilled water air conditioning services to customers
that are connected to the relevant distribution network.
Tabreed was incorporated on 17 June 1998 as a public joint stock company with unlimited duration
pursuant to the UAE Commercial Companies Law Number 8 of 1984 (as amended), and operates
under Dubai licence no 506206. The registered office of Tabreed is at PO Box 32444, Dubai, United
Arab Emirates and the telephone number is 971-4-3404422.
Tabreeds current authorised and issued share capital is AED 1 billion. Tabreed is listed on the
Dubai Financial Market (DFM) and has a wide shareholder base, with the largest single
shareholding being 7.38% as at 31 May 2006. Its shareholders include government bodies and
investment institutions, private offices of high net worth individuals, overseas investors and the public.
Following incorporation, Tabreed acquired Gulf Energy Systems LLC (GES) in 1998 and signed a
contract with the UAE Armed Forces (UAF) in 1999 to own and operate a 3,800 ton district
cooling plant at Zayed Military City. Subsequently, Tabreed went on to become the first and only
commercial provider of district cooling services in the Gulf region and, according to a report on
Tabreed by EFG-Hermes dated 30 November 2005 (the EFG-Hermes Report), the largest in the
world. The installed capacity is currently approximately 144,000 refrigeration tons (tons) of which
Tabreed owns approximately 134,000 tons and operates approximately an additional 10,000 tons. It
has a further pipeline of at least 22 new greenfield or expansion projects in the UAE of
approximately 250,000 tons capacity in various stages of implementation. The UAF has been
Tabreeds major customer to date, accounting for, in the fiscal year 2005, approximately 85% of
installed capacity and 84.4% of the Companys district cooling revenues.
In addition, the Company has expanded its district cooling operations by establishing subsidiaries and
associate companies in Qatar, Bahrain and Saudi Arabia. It is already implementing projects of about
90,000 tons in Qatar and Bahrain, and has identified prospects of over 100,000 tons in each country.
Although Tabreed is currently exploring initial project opportunities it is expected that Saudi Arabia
will be the main revenue contributor in the future. In Oman, Tabreed LLC Oman was recently
established, and is in the early stages of development. The Company is currently considering
opportunities to develop into Jordan and Kuwait.
Tabreed typically enters into long-term (usually 20 year) renewable contracts to supply chilled water
air conditioning services to customers it regards as creditworthy, with a view to providing the
Company with stable cash flow. The majority of new contracts are being entered into with private
commercial customers and other government authorities and it is expected that, by the end of 2008,
they shall represent the majority of Tabreeds customer base.
Principal Business Segments
The business segments of Tabreed comprise:
*

District cooling air conditioning (chilled water): The provision of district cooling services
represents the core business activity for Tabreed. For the year ended 31 December 2005, this
segment contributed approximately 54.4% of Tabreeds gross profit before depreciation.

Contracting: Tabreed, through its subsidiary GES, provides contracting services for the
conversion of buildings to ensure compatibility with its district cooling system. For the year
ended 31 December 2005, this segment contributed approximately 13.3% of Tabreeds gross
profit before depreciation.

Servicing: Tabreed also provides ancillary servicing, including engineering, maintenance and
consultancy services, to its district cooling systems through its subsidiaries, Ian Banham and
Associates and Installation Integrity 2000 LLC. For the year ended 31 December 2005, this
segment contributed approximately 12.1% of Tabreeds gross profit before depreciation.
48

Manufacturing: Tabreed, in conjunction with its joint-venture partner Emirates Pre-insulated

Pipes & Industries (EPPI), manufactures and sells piping systems for district cooling and
other energy related applications. For the year ended 31 December 2005, this segment
contributed approximately 20.2% of Tabreeds gross profit before depreciation.

The gross profit before depreciation in 2004 and 2005 for all segments:

Chilled Water ....................................................

Contracting .......................................................
Servicing ............................................................
Manufacturing...................................................

2005
(AED mn) (% growth)
104.1
25
25.4
53
23.2
164
38.6
144

TOTAL .............................................................

191.3

2004
(AED mn) (% growth)
83.1
34
16.6
177
8.8
103
15.8
50

54

124.3

50

Strategy
According to the EFG-Hermes Report, Tabreed holds a dominant market position in the UAE and
regional district cooling industry It has grown its business rapidly and its business strategy is aimed
at continuing this growth, whilst consolidating its existing position. The key elements of this are:
*

Maintaining its relationship with the UAF, which is considering the use of district cooling at a
number of new sites;

Diversification of its customer base, which is already being undertaken;

Expansion within the UAE, as well as in other countries in the Gulf region;

Investing in technology and customer service capabilities to ensure seamless service; and

Continuing to demonstrate the economic and environmental benefits of district cooling.

The current boom in the real estate markets in the UAE and other countries of the Gulf Cooperation
Council (GCC) provides a great opportunity for district cooling to establish a firm foothold.
Tabreed, as the market leader, intends to seize this opportunity and create a solid base of customer
contracts and assets that will lock in its revenues for next 20 years.
Tabreed intends to target the following categories of buildings for district cooling services:
*

Large multi-storey buildings, particularly new developments;

Institutional complexes such as military bases, government buildings, universities and schools,
hospitals and mosques;

Commercial complexes such as officer towers and shopping malls;

Leisure facilities such as hotels; and

Large residential clusters such as multi-storey buildings and housing compounds.

Business
Tabreeds core business activity is the provision of district cooling air conditioning systems in the
UAE, Qatar, Bahrain and Saudi Arabia. Tabreeds business is divided into the four principal
segments: chilled water district cooling, contracting, servicing and manufacturing.
The District Cooling Chilled Water segment contributed AED 133.1 million of turnover,
representing approximately 33.2% of the Companys revenue, for the financial year ended 31 December
2005.
District Cooling Chilled Water
District cooling is an efficient system of air conditioning. It uses a central plant to cool water and
distribute it through insulated pipes to customers buildings. Air is then forced past cold-water tubing
to produce an air conditioned environment. The warmer water is returned to the central plant to be
re-chilled and redistributed. The technology is the same as in standard air conditioning systems. Each
central plant consists of one or more chillers, heat exchangers, pumps and insulated piping. District
cooling can be run on electricity or natural gas, and can use either regular water or seawater for heat
rejection. Gas powered plants are usually more expensive to install, but cheaper to operate.
49

District cooling achieves economies of scale through the use of a centralised plant, rather than
individual chillers in each building. The larger the central plant, the larger the economics of scale. By
reducing capital and energy costs, district cooling can reduce building operating costs and eliminate
the capital cost of conventional air conditioning, whilst meeting environmental regulations with an
outsourced service.
District cooling output is measured in tons and ton-hours of cooling. One ton-hour of cooling is
equivalent to 12,000 British Thermal Units (BTU). Ton-hours are measured by recording the flow
of water and the differential between the chilled water temperature at the point of supply and the
warmer water temperature at the point of return. Plant capacity is specified in tons of cooling
capacity. Contracts with its customers specify how many tons are to be provided.
District cooling systems can replace any type of air conditioning system, but primarily compete with
air-cooled chiller systems serving larger buildings and installations. Most tall buildings have such
chillers, typically mounted on the roof. In addition to consuming large amounts of electricity, this
typical building equipment is subject to a difficult operating environment, including extreme heat,
saline humidity and windborne sand. Over time, performance, efficiency and reliability suffer, leading
to significant maintenance costs and ultimately to equipment replacement. In addition, air cooled
equipment can be noisy and can create uncomfortable drafts.
By switching to a water-cooled chiller district cooling technology, building owners stand to gain from
a reduction in electricity consumption by up to 50%. Added to this are reductions in maintenance
and capital replacement costs, and improved reliability and performance.
Competitive Strengths
The following factors give the Company competitive advantages in the district cooling industry in the
UAE.
*

Leading position in the district cooling industry in the GCC region. The Company has been the
leading commercial provider of district cooling services since it acquired GES in 1998. Since
then, management believes it has developed significant operational experience building the
Company into a business that operates 19 plants, of which it owns 17 plants.

Low counterparty credit risk. A significant proportion of the Companys revenue comes from
long-term contracts with various bodies of the UAE Government (which has been awarded a
long-term credit rating of Aa2 (stable outlook) by Moodys Investors Service Limited) including,
in particular, the UAF which accounted for approximately 85% of the Companys installed
capacity and 84.4% of the Companys district cooling revenues as at 31 December 2005.

Low risk operating model. The Companys strategy is to build new plants in areas with
significant potential demand for district cooling services. The Company seeks to secure long-term
contracts with large anchor customers, the future revenue from which would be expected to
cover the capital and operating costs of the plants. Typically these plants are built with the
potential for additional capacity to service future customers. When a credit-worthy customer is
identified, the Company seeks to secure a long-term contract (typically 20 years) with such a
customer.

Available capacity for further growth. The Company has achieved a critical base of operating
assets, which provides a stable platform for growth. Most of its plants are designed for
expanding beyond the initial capacity, and such expansions are usually more profitable than the
base plants themselves.

Attractive market fundamentals. In the hot and humid climate of the UAE, air conditioning
tends to be regarded as a basic necessity. Air conditioning accounts for the single largest
consumption of power in the UAE, being an estimated 70% of peak demand according to the
EFG-Hermes Report. District cooling systems are principally used in regions where there is
dense urban development, rapid economic growth and new development, and high per capita
spending on air conditioning. The Company believes that the UAE and the region is a
particularly attractive district cooling market, especially due to the high concentration of
development in cities such as Abu Dhabi and Dubai and the high temperatures and humidity
levels which prevail.

Superior economic and environmental benefits compared to traditional air conditioning. District
cooling provides significant competitive advantages over traditional air conditioning systems to
customers, municipalities and state governments and the environment. These are detailed under
Benefits of district cooling below.
50

High barriers to entry. District cooling is a capital intensive method of air conditioning, with
new plants requiring substantial capital to build. The Company believes that this has been, and
will remain in the future, a significant deterrent to potential competitors.

Highly experienced management team with a successful track record. The Companys management
has a strong track record in the district cooling industry in the UAE. The team is led by a
highly experienced senior management who have between them over 50 years of relevant
industry experience (see Management and Employees below).

Benefits of district cooling

Despite the high initial capital cost and the licensing requirements compared to conventional airconditioning, the benefits of district cooling, both commercial and social, are recognised by building
owners, property management companies, municipal governments, state planning committees, and
environmentalists.
Benefits to the owner or manager of the building include:
Reduced construction costs. By outsourcing the cooling requirements, the owner or manager of a
large property does not need to invest the capital cost of air conditioning, which can represent
up to 10% of the overall cost of a building.

Reduced maintenance costs. Larger buildings require full time experts in air conditioning,
security, ventilation, electricity and elevators. Outsourcing of cooling services leads to reduction
in building maintenance costs and overheads as there are no on-site chillers to maintain.

Increased revenue generating area. The space where the chiller would have been located is freed
up for the construction of roof-top pools or gardens. Reduction in roof noise can increase the
rents chargeable for top floors of large buildings.

Greater ability to control and regulate air quality. Traditional systems are difficult to control
when output is below the optimal levels for which the system was designed. The economies of
scale of district cooling systems allow operators to match supply and demand of cooling more
exactly.

Improved efficiency through economies of scale. A central plant requires up to 30% less capacity
than the aggregate capacity required under individual systems.

Lower fuel consumption than an on-site system. District cooling can substantially reduce the
electricity costs of cooling a large property.

Benefits to governments, municipalities and the environment include:

Reduction of pollution and CFCs. District cooling plants do not use CFC refrigerants.

*
*

Reduced energy consumption and reduced peak energy demand. (enabled by thermal storage
systems) leads to improved energy security for a nation. As mentioned above, it is estimated
that 70% of the overall electricity consumption in the UAE during peak load periods in the
summer is attributable to air conditioning systems.

Economics of district cooling

The economics of district cooling systems, depend on securing long-term off-take contracts with
customers of appropriate credit standing, to provide reliable revenue streams to service debt.
Normally a commercial provider of district cooling systems would target a capacity of 10,000 tons or
more to derive the benefits of scale economies.
An anchor contract needs to be established with one or two large reliable customers (such as a
shopping mall or a military installation), while add-on contracts can be with smaller customers
(office buildings, hotels, etc.). The justification of a project depends on the quality of the anchor
contract(s). Typically, once sufficient capacity has been pre-sold to anchor customers, the central
plant is designed for 2-3 times the pre-sold capacity, to allow for additional chillers to meet increases
in demand from existing customers and from new customers in close proximity to the distribution
system.
Careful choice of the location of the central plants is important to the viability of a district cooling
system. The plant must be located close to its customers, and there should be sufficient space
available at the plant site for future expansion.
51

GCC District Cooling Market

Tabreed pioneered commercial district cooling services in the UAE, when it commissioned the first
plant (of 3,800 tons capacity) for the UAF in 1999. Since then the installed capacity in the UAE
market has grown to approximately 160,000 tons, with Tabreed owning approximately 134,000 tons
and operating an additional 10,000 tons (under an operating and maintenance contract).
In recognition of its achievements, the International District Energy Association (IDEA) awarded
Tabreed two Gold Awards in 2005 for the largest amount of space cooled and the maximum
numbers of buildings connected.
The UAE currently is one of the most active real estate markets in the world. There are a number of
landmark real estate projects being undertaken by major developers such as Emaar Properties,
Nakheel Group, Dubai Holdings, Aldar and numerous other private sector developers.
Saudi Arabia has a larger installed central plant cooling capacity than the UAE, reflecting its larger
economy. Plants in Saudi Arabia service establishments such as hospitals, universities, airports and
mosques. They are owned and operated by the establishments that they serve. None are operated on
a commercial basis at present, although a number are known to be exploring the possibility of
outsourcing the service.
Plant Overview
Tabreed currently owns 17 plants with a total current installed capacity of approximately 134,000
tons. The Company expects to almost treble its installed capacity over the medium term.
Out of the new capacity of 178,150 tons of new capacity to be financed, 19,400 tons are under
expansions of existing plants. Out of the 69,250 tons of new capacity already financed, 15,000 tons
are under expansions of existing plants.
Plant Summary
Customer profile of plants owned:
Customer categories are comprised of the following:
Category 1: UAE Armed Forces, Abu Dhabi or Dubai Governments.
Category 2: Quasi Governments (Abu Dhabi or Dubai), Governments of other Emirates.
Category 3: Private commercial.
The break-down in installed capacity on a category basis is as follows (actuals up to 2005 and the
rest projected):

Category 1 ........
Category 2 ........
Category 3 ........

2001

2002

2003

60
40
0

65
17
18

85
7
8

100

100

100

2004
(%)
80
10
10
100

2005

2006

2007

2008

85
8
7

79
13
8

58
18
24

50
13
36

100

100

100

100

31 December
2003

2001

2002

Number of plants owned

Military............................................
Commercial & Govt. .......................

1
1

4
3

8
6

Total ................................................

14

Installed Capacity (tons)

Military............................................
Commercial & Govt. .......................

3,800
2,500

27,800
12,900

63,000
25,400

63,000
17,700*

96,750
17,700

Total ................................................

6,300

40,700

88,400

80,700

114,450

In 2004, Tabreed sold two plants that were serving a government customer to an associate company.

52

2004
8
4*
12

2005
11
4
15

Detailed customer profile of plants to be financed with the proposed issue of the Certificates and
other future debt:
Customer
Customer
Category
Phoenix 1 & 2 expansion
UAE Armed Forces
1
Aldar 10 towers (phase 1)
Aldar (public company)
3
Ajman-01
Ajman Govt. & Private
2&3
Zayed Sports City expansion
Quasi Govt. (Abu Dhabi)
2
Police Guard Cmpd (mobile chiller based)
Abu Dhabi Govt.
1
Aldar New Souk (phase 1)
Aldar (public company)
3
Ajman-02 (phase 1)
Ajman Govt. & Private
2&3
Al Ain University (phase 1)
Abu Dhabi Govt.
1
Fujairah City (phase 1)
Commercial customers
3
Sh Zayed Road plant 2 (phase 1)
Dubai Govt.
1
RAK expansion
Commercial customers
3
Khalifa City AUH Univ (phase 1)
Abu Dhabi Govt.
1
Dubai Metro (phase 1)
Dubai Govt.
1
Khalifa City Al Kheeli Mall (phase 1)
Al Kheeli Mall
3
Dubai Pearl
Omnix International
3
Potential other projects
Various
1,2,3
Based on installed capacity, the break-down for the above new projects (excluding Potential other
projects) is as follows:
Customer Category
Category 1: UAF/Abu Dhabi or Dubai Governments .....................................
Category 2: Quasi Governments (Abu Dhabi/Dubai) & Governments of other
Emirates.........................................................................................................
Category 3: Private commercial.........................................................................
TOTAL ..............................................................................................................

Tons

64,650

36

27,750
88,750

14
50

178,150

100

It takes 18-24 months for Tabreed to design and construct a new plant. Whilst the initial capacity
matches the requirement of the anchor customer, a plant is typically designed by Tabreed to
accommodate expansion of up to 2-3 times its initial capacity. Expansion projects take less time,
typically 6-12 months to implement and are more profitable as the capital cost per unit capacity is
usually lower than the original plant.
The UAF has been Tabreeds major customer to date, accounting for, in the fiscal year 2005, 84.4%
of the Companys district cooling revenues. Tabreed entered into a master contract with UAF in
January 2001 for an initial term of 20 years and which sets out the uniform tariff structure and other
terms that apply to all projects undertaken for the UAF. Thus, the UAF has provided a firm anchor
for the Companys growth since its incorporation. It is an arm of the UAE government (UAE has a
long-term rating of Aa2 by Moodys Investors Service Limited), which, therefore, favourably impacts
Tabreeds business risk profile.
Tabreed has also built plants throughout the UAE to serve private commercial customers, for
example, hotels, schools, building owners, shopping malls in Dubai (Sheikh Zayed Road), Al Ain (Al
Jimi Mall amongst others), Ras Al Khaimah (Al Manar Mall), and, more recently, in Abu Dhabi
(Marina Mall; also part of the expanded capacity of the Muroor Street military plant is contracted to
private commercial customers).

53

Tabreeds existing portfolio of operating plants is shown below:

Operating plants
Installed
capacity
(tons)

Capital
cost
(AED mn)

3,800
10,000
10,000
10,000
10,000
6,000
4,000
19,050
7,600
15,100
7,200

49.0
105.7
106.1
87.1
102.9
73.0
45.9
180.6
90.1
111.0
83.0

102,750

1,034.4

2,500
5,000
7,400
2,800
14,150

20.0
42.2
82.8
19.7
110.0

Total Commercial & Government.........................

31,850

274.7

Grand Total...........................................................

134,600

1,309.1

Plants

Date commissioned

Military plants:
Tabreed 1...............................................................
Tabreed 2...............................................................
Tabreed 3A ............................................................
Tabreed 3B ............................................................
Tabreed 4...............................................................
Tabreed 6...............................................................
TW-01....................................................................
Phoenix 1 & 2........................................................
Zayed Sports City..................................................
Muroor St. (incl. expansion)* ...............................
AL-03.....................................................................

Nov 99
Jun 02
Jun 02
Mar 03
Mar 03
Mar 06
Apr 02
Feb 05
Jul 03
Jul 03 & Aug 05
Oct 05

Total Military
Commercial & Government plants:
Al Manar Mall (RAK)..........................................
Al Ain (incl. expansion) ........................................
Sh Zayed Road (Dubai) ........................................
UWEC** ...............................................................
Marina Mall ..........................................................

Dec 00
Jan 02 & Jan 04
Oct 02
Jul 03
Mar 06

* Has non-military customers as well

** Planned to be transferred to the customer in late 2006

Tabreed has experienced a steady diversification of its customer base, with the majority of new
contracts being signed with private commercial customers and other government authorities.

54

Contractual Overview
Contracts for Provision of Chilled Water
Before building any new project, Tabreed secures a long-term (usually 20 years) off-take agreement
with a creditworthy anchor customer. Financing is arranged on the strength of the off-take
agreement.
Tabreeds business derives stability and sustainability from long-term customer contracts. This enables
commitment of plant capacity over the asset life, which is essential in a capital intensive business.
Customers are charged a fixed periodic (usually monthly) charge for the availability and maintenance
of the system (the Capacity Charge) plus a variable charge based on units of consumption (the
Consumption Charge).
The Capacity Charge is set by reference to the investment in constructing the plant, fixed costs
incurred in operating the plant plus a target return on investment. It is subject to inflation
adjustments. The Consumption Charge is set by reference to the variable costs incurred to produce
the volumes of refrigeration tons consumed. In some cases the Consumption Charge is subject to a
minimum amount. Tabreed is not exposed to changes in gas, electricity and water costs and most
other costs incurred in relation to materials used for cooling as changes in these costs result in
changes to the Consumption Charge and are, therefore, passed through to customers. Customers may
or may not have to pay for connection to the system, but do have to pay for any structural changes
required to their own buildings to enable these buildings to accept district cooling.
Customers are invoiced on a monthly basis and payment is made by the customer mostly by bank
transfer. Consumption is measured by sophisticated measuring systems that monitor the flow of water
and supply and return temperature. From this data, the amount of energy used is calculated in BTUs
and converted into ton-hours. The metering systems are read monthly. Customers are billed in
accordance with the meter readings and the terms of the relevant contract.
Failure to provide a continuous service for more than a 24 hour period results in a pro rata
adjustment to the applicable Capacity Charge based on the amount of time during which service was
not provided. Tabreed has the right under its commercial contracts to stop the supply of chilled
water in the event of late payment by the customer.
Key provisions of a typical cooling services agreement of Tabreed are:
*

An initial term of 20 years;

On expiry of the initial term, the agreement is automatically extended and continued until either
party delivers a notice of termination;

Cooling capacity to be committed;

Customers obligations including setting up facilities like piping in its premises to receive and
utilise district cooling services;

Companys obligations including setting up the central chilling plant and delivering the chilled
water to the customer at the agreed point of delivery;

Details of charges including Capacity Charge (an annual fixed charge per unit of capacity) and
Consumption Charge;

Provision to increase Capacity Charge, linked to the inflation rate; and

Provision to increase the Consumption Charge based on changes in prices of basic inputs.

Advantages associated with long-term contracts include:

*

Stability of off-take;

Commitment of customers before capacity is installed;

Stability with respect to inflation and related cost escalation factors; and

Overall reduction in market risk in a highly capital intensive business.

The sole customer of plants built for military bases is the UAF. Contracts with the UAF have a
lower Capacity Charge than commercial contracts, but a minimum consumption level is specified. The
terms for service provision (rates, minimum consumption, etc.) for all plants built by Tabreed for the
UAF are set out in one master contract.
Tabreeds contract with the UAF and its commercial contracts typically provide for an initial term of
20 years from the date of the commencement of service and, thereafter, are terminable by either party
55

on the giving of two years notice. The UAF have the right to terminate the contract at any time
when it is considered in the public interest to do so, giving rise to an obligation to pay adequate
monetary compensation to Tabreed.
Contracts for Construction of District Cooling Plants and Systems
Tabreed undertakes a conceptual design for a plant, and awards the EPC (engineering, procurement
and construction) contract on that basis.
The EPC contracts conform to the Federation Internationale des Ingenieurs Conseils (FIDIC)
standard. Separate contracts are awarded for the cooling plants and the distribution systems. For
cooling plants, Tabreed historically used to select the EPC contractor on the basis of competitive
bidding. Currently, it is using its own contracting joint venture formed with SNC Lavalin, called SNC
Lavalin Gulf Contractors (SLGC), which is described further on page 59. Contractors for the
distribution systems are selected on a competitive basis.
Contracts for Fuel and Water
Tabreed pays the standard market tariff for the supply of electricity and water. Gas is supplied at a
fixed rate (reviewed annually) pursuant to a supply contract with the Abu Dhabi National Oil
Company (ADNOC) which has recently been renewed for five years to expire in April 2011.
Supply Linkages
As described above, Tabreed has a supply agreement with ADNOC for procuring natural gas which
is used in some of its plants. Water and electricity are bought from the local utilities. Although there
are no long-term contracts, supply constraints are not envisaged in the foreseeable future as the local
utilities (Abu Dhabi Distribution Company, Al Ain Distribution Company, Dubai Electricity and
Water Authority and Federal Electricity and Water Authority) have not indicated an inability to meet
Tabreeds requirements to date.
Out of the total installed capacity under operating plants, just over 50% is gas-based. This is expected
to rapidly reduce, going forward, to about 25% after the commissioning of all the projects listed on
page 61.

Manufacturing
Emirates Pre-insulated Pipes & Industries (EPPI)
EPPI, set up in 2000, is 60% owned by Tabreed and 40% by Saudi Pre-insulated Pipes and Industries.
It commenced operations in 2002. EPPI engineers and manufactures thermally pre-insulated piping
systems for chilled and hot water, oil and gas, and other energy related applications. Nearly 90% of
its output is sold for use in the district cooling industry. It has benefited from the growth in the
UAE district cooling industry, and serves all district cooling providers (including Tabreed) in the
country. Its manufacturing facilities are located in Abu Dhabi, with a built-up area of 50,000 square
metres and equipped with the latest pipe fabrication technology. Apart from manufacturing, it also
provides application engineering support, on-site technical assistance and installation supervision. The
Company is currently expanding its facilities doubling it built up area. This plant facility is being
constructed to add new product lines.
The Manufacturing segment contributed AED120.6 million of turnover, representing approximately
30.1% of the Companys revenue, for the financial year ended 31 December 2005.

Contracting
Gulf Energy Systems (GES)
GES was incorporated in 1995 and is 99.99% owned by Tabreed. It is a contracting company
engaged in undertaking building conversions in order to making a customers building compatible
with district cooling, i.e. assisting the change-over from traditional air-conditioning system to district
cooling. Most of its business is from the military for retrofitting their sites to connect to Tabreeds
plants.
The Contracting segment contributed AED109.3 million of turnover, representing approximately
27.3% of the Companys revenue, for the financial year ended 31 December 2005.
56

Servicing
Ian Banham and Associates (IBA)
IBA was established in the UAE in 1976. It provides engineering consultancy services in all aspects of
electrical and mechanical works for residential, commercial, hotels, institutional and industrial
projects. Its main office is in Abu Dhabi with branches in Dubai and Sharjah. It has successfully
designed, executed and commissioned a number of landmark buildings and prestigious projects, such
as the Dubai Media City, the Burjuman Centre and the Royal Meridien, Abu Dhabi. Tabreed
acquired a 70% stake in IBA in 2004.
Installation Integrity 2000 LLC (i2i)
i2i was established in 1999 to provide technical services for both new and existing buildings in the
following areas independent commissioning of mechanical, electrical and specialist systems (including
HVAC systems), building services inspections, maintenance review and engineering services. Tabreed
acquired a 60% shareholding in i2i in 2002. Tabreed has acquired an additional 20% stake in the
company from one of the original shareholders. The remaining 20% is owned by management.
Tabreed is currently evaluating i2is business prospects. Such evaluation may result in a downsizing of
i2is business activities.
Balticare Gulf LLC (Balticare)
Balticare was incorporated in 2003. The company acts as a distributor for Baltimore Aircoil
Company, which is a worldwide manufacturer and marketer of heat transfer and ice thermal storage
products. It offers a range of factory-assembled cooling towers, closed circuit fluid coolers and
evaporative condensers and serves air conditioning, refrigeration, industrial, process, and power
generation customers. Balticare also provides risk assessment and maintenance services for the risk of
legionellosis in evaporative cooling systems, water quality management, and ongoing operation and
surveillance of evaporative cooling and water treatment equipment (including commissioning,
disinfection and cleaning, water sampling and analysis, equipment maintenance and servicing).
The Servicing segment contributed AED37.8 million of turnover, representing approximately 9.4% of
the Companys revenue, for the financial year ended 31 December 2005.

57

Organisational Structure

Tabreed

44%

55%

25%

100%

Qatar Central Cooling Company

(Qatar Cool)
United Development Company 51%
Others 5%
Bahrain District Cooling Company
Esterad Inv Co 40%
AA Bin Hindi Group 5%

Tabreed District Cooling Company

ACWA Power 60%
Rusd Co. of Jeddah 15%

51%

20%

100%

Summit District Cooling Company

(SDCC)
49% Sumitomo

Industrial City Cooling Company

(ICCC)
ADIC & Oasis Leasing 80%

National Central Cooling Company

Ras Al Khaimah
(Tabreed RAK)

99.9%

60%

70%

51%

Tabreed LLC Oman

Controlling Interest

Gulf Energy Systems (GES)

Mohamed Saif Al Mazorouie 0.1%

Emirates Pre-insulated Pipes

Industries LLC
Saudi Preinsulated Pipes 40%

Ian Banham & Associates

Management 30%

SNC Lavalin Gulf Contractors

(SLGC)
SNC Lavalin 49%

10%

BAC Balticare Gulf LLC

Gulf Energy Systems 90%

80%

Installation Integrity 2000 LLC (i2i)

Management 20%

90%

Minority Interest

District Cooling subsidiaries/associates

Tabreed has formed a number of subsidiary/associate companies to enter other GCC markets. There
are also some instances of project-specific subsidiaries/associates within the UAE. These are described
below.
GCC companies
Tabreed has set up the following companies in Qatar, Bahrain and Saudi Arabia. In each case,
Tabreed has a management contract with the company to provide management services:
*

Qatar Central Cooling Company (Qatar Cool)

Tabreed direct shareholding 44%
Tabreed and United Development Company (UDC) formed Qatar Cool in 2003. UDC was
incorporated in 1999 as a private sector Qatari company. As at 31 December 2005, it had an
authorised and issued share capital of Qatari riyal 825 million (US$227 million), is listed on
Doha Stock Exchange and widely held. It is involved in the development and implementation of
medium to large-scale projects across a number of sectors. Apart from district cooling, UDC is
setting up Pearl Qatar (a US$2.5 billion island development project), has equity investments
in a dredging company and a couple of hydrocarbon businesses.
Qatar Cool is implementing its first cooling plant in the West Bay Lagoon. The capacity (in two
phases) is 67,000 tons. It is considering a second project, the capacity of which is 110,000 tons.

Bahrain District Cooling Company (Tabreed Bahrain)

Tabreed direct shareholding 55%
Tabreed, Esterad Investment Co. (Esterad) (40%) and the A.A. Bin Hindi Group (5%) formed
Tabreed Bahrain in 2004. Esterad was established in 1973 and was previously known as the
National Imports and Exports Co. Its largest shareholders are Bahrains Pension Funds
Commission and the National Bank of Bahrain. Esterad previously held a monopoly on the
trade of cement in Bahrain, around which it built up a successful trading business and a sizeable
investible surplus. Since 2002, Esterad has been transformed from a trading house to an
investment company. Esterad invests in securities and managed funds within the GCC and
elsewhere, and has exposures to a number of highly valued listed companies.
58

Tabreed Bahrain is setting up its first project (22,000 tons) in the Diplomatic Enclave of
Bahrain, with the upcoming Bahrain World Trade Centre and the Bahrain Financial Harbour as
its anchor customers. It is considering other projects of total potential capacity of over 100,000
tons.
*

Tabreed District Cooling Company (Tabreed Saudi)

Tabreed direct shareholding 25%
Tabreeds partners in Saudi Arabia are ACWA Power (Arabian Company for Water and Power
Development), owned by the A. Abunayyan group (holding 60%), and the Rusd Company of
Jeddah (holding 15%). Both groups are well-established business houses in the country.
Tabreed Saudi was set up in 2005 and is currently exploring initial project opportunities.
Apart from these three companies, Tabreed has set up Tabreed Holdings WLL (in Bahrain) and
Tabreed LLC Oman, both as wholly owned subsidiaries. Both the companies are in early stages
of development, with no significant commercial activities to date.

UAE companies
Summit District Cooling Company (SDCC)
Tabreed direct shareholding 51%
SDCC is a subsidiary company set up in equity partnership with Sumitomo in 2004 to
implement and operate an 11,000 ton project for the UAF GHQ.

Industrial City Cooling Company (ICCC)

Tabreed direct shareholding 20%
ICCC was formed in 2004 by Tabreed and the Abu Dhabi Investment Company (ADIC)
(holding 20% and 80% of the equity, respectively) to own and operate two plants of 9,700 tons
that were originally set up by Tabreed for the General Industrial City, Abu Dhabi. In 2005,
Oasis International Leasing Company purchased a portion of ADICs shareholding.

National Central Cooling Company Ras Al Khaimah (Tabreed RAK)

Tabreed shareholding 100% (40% through Gulf Energy Systems)
Tabreed RAK is a wholly-owned subsidiary of Tabreed that owns and operates a 2,500 ton
plant in Ras Al Khaimah.

Other subsidiaries / joint venture

SNC Lavalin Gulf Contractors (SLGC)
SLGC was set up in 2004 as a joint venture between Tabreed and SNC Lavalin. Despite the
shareholding of Tabreed in SLGC, SLGC is an independent EPC contractor and Tabreed does not
have management control over it. SLGC provides design and construction services to Tabreed for its
district cooling projects. SLGC is managed by SNC Lavalin International. The terms on which
Tabreed and SLGC contract are negotiated on a project-by-project basis, thereby maintaining an
arms length relationship between the parties. SLGC are usually contracted to build the plants for the
cooling projects but do not provide or install the distribution systems.

Major Shareholders
Tabreeds current authorised and issued share capital is AED 1 billion. Tabreed is listed on the DFM
and has a wide shareholder base, with the largest single shareholding being 7.38% as at 31 May 2006.
Its shareholders include government bodies and investment institutions, private offices of high net
worth individuals, overseas investors and the public.

59

The following table sets out the shareholders of Tabreed with shareholdings in excess of 1.00% (as at
31 May 2006):
Shareholding
Name
% (rounded)
General Pension Fund and Social Security Authority ............................................................
7.38
UAE Offsets Group (General Investment FZE) .....................................................................
5.92
Abdul Raouf Waleed Abdel Raouf Al Bitar...........................................................................
4.14
Abu Dhabi Investment Company............................................................................................
3.48
Sheikh Mohd Bin Sultan Bin Suroor Al Dhaheri ..................................................................
3.16
National Bank of Abu Dhabi Trading Fund ..........................................................................
1.25
Abu Dhabi Refreshment Co (inheritors of Sheikh Sultan Bin Suroor Al Dhaheri)...............
1.00
Others.......................................................................................................................................
73.67
Total.........................................................................................................................................

100.00

The Memorandum of Association of the Company stipulates (a) a ceiling of 49% for expatriate
shareholding, (the maximum allowable under the current law) and (b) a 20% limit on holding by a
single shareholder.

Recent Developments
New Contracts and Project Expenditure Programme
Tabreed has customer contracts for new projects totalling about 250,000 tons with a capital cost of
about AED 1.9 billion, and has identified prospects involving some 40,000 tons capacity involving a
capital cost of approx. AED 300 million. Some of these new contracts establish networks in the heart
of cities that will provide dominant positions for future expansion. Many projects have substantial
subsequent expansion potential.
One example of a new project is the agreement to provide the entire Dubai Metro Project with
district cooling services. A 30-year contract has been awarded to Tabreed, after an in-depth technical
and financial analysis of the offers submitted by several companies.
The contract was drawn up in line with the BOOT (build, own, operate and transfer) system under
which Tabreed would offer centralised cooling to all Metro stations as per international standards so
as to ensure a care-free environment for metro passengers. Tabreed will also offer centralised cooling
to all development projects undertaken along with the 43 metro stations. The stations will initially
require a cooling load of approximately 36,000 tons and, upon completion, the cooling load will peak
at approximately 350,000 tons.
The projects are in various stages of implementation. Some of these are financed under existing
facilities, while the rest are to be financed under the proposed issue of the Certificates and other
potential sources of finance. These are categorised accordingly in the table below:
Expected
Commissioning
Date

Plants
Financed:
AD-04 (under JV with Sumitomo) ..............................................
Sh Zayed Road expansion...........................................................
Baynunah (6 towers)....................................................................
DB-03 (mobile chiller based) .......................................................
Tabreed 5.....................................................................................
FUJ-03 .........................................................................................

Total Currently Financed .............................................................

60

Jun
Jun
Jun
Jul
Aug
Sep

06
06
06
06
06
06

Installed
capacity
(tons)

Capital
cost
(AED mn)

11,000
15,000
11,250
5,000
22,000
5,000

96.5
100.0
110.0
10.0
250.0
32.0

69,250

598.5

Expected
Commissioning
Date

Installed
capacity
(tons)

Capital
cost
(AED mn)

6,400
10,000
22,500
7,500
5,000
10,000
12,000
10,000
10,000
12,000
11,250
5,500
20,000
7,500
28,500
40,000

35.0
86.0
145.0
48.0
10.0
100.0
120.0
80.0
101.0
120.0
92.0
20.0
60.0
85.0
160.0
300.0

Total to be Financed ....................................................................

218,150

1,562.0

Grand Total..................................................................................

287,400

2,160.5

Plants
To be financed:
Phoenix 1 & 2 expansion.............................................................
Aldar 10 towers (phase 1)............................................................
Ajman-01 .....................................................................................
Zayed Sports City expansion.......................................................
Police Guard Cmpd (mobile chiller based) .................................
Aldar New Souk (phase 1) ..........................................................
Ajman-02 (phase 1)......................................................................
Al Ain University (phase 1).........................................................
Fujairah City (phase 1)................................................................
Sh Zayed Road plant 2 (phase 1)................................................
Khalifa City AUH Univ (phase 1) ...........................................
RAK expansion ...........................................................................
Dubai Metro (phase 1) ................................................................
Khalifa City Al Kheeli Mall (phase 1).....................................
Dubai Pearl..................................................................................
Potential other projects................................................................

Jun
Aug
Sep
Jun
Sep
Jan
Jan
Jan
Jan
Mar
Mar
May
Jul
Dec
Jan

06
06
06
06
06
07
07
07
07
07
07
07
07
07
08

The majority of the projects under construction are likely to be completed by the end of 2006, while
the rest would be in 2007 or early 2008. The contracts in Dubai (for the Dubai Metro), Ajman and
Fujairah are of strategic importance because these involve laying distribution networks through the
hearts of the respective cities. Once these assets are in place, they are likely to put Tabreed in a
natural monopolistic position for the immediate vicinity. Expanding these plants and connecting new
customers would involve a fraction of the cost that a new entrant is likely to incur. The contracts for
the Aldar developments, Khalifa City, Marina Mall and Baynunah towers form part of a series of
contracts Tabreed has been awarded from various Abu Dhabi authorities and institutions.
The majority of the Plants listed are fully backed by firm offtake agreements, while a few are
partially sold, with the remaining capacity expected to be contracted soon.
Most of the projects have strong build-out potential. The total build-out potential on the Dubai
Metro contract itself is close to 300,000 tons, while for all the other projects it is approximately a
total of 140,000 tons.

Management And Employees

Board of Directors and Senior Management
The Board of Directors of Tabreed and senior management are as follows:
Directors
Name

Position

Other Principal Activities

Mohammed Salf Al Mazrouie

Joined
1998

Chairman

Chief Executive Officer of the UAE

Offsets Group, Board Member of Abu
Dhabi Ship Building Company, First
Gulf Bank

Khalifa Mohammed Al Kindi

2002

Vice Chairman

Chairman of National Bank of Abu

Dhabi, Deputy Managing Director of
Abu Dhabi Investment Authority,
Board Member of Abu Dhabi Aviation
Company

Dany Safi

1998* Chief Executive Officer

Board Member of the International

District Energy Association

Mohamed Darwish Al Qamzi

1998

Board member of Qatar Cool, Tabreed

Bahrain, Tabreed Saudi, SLGC, EPPI

Board Member

61

Directors
Name

Joined

Position

Other Principal Activities

Ahmed Ateeq Al Mazouei

1998

Board Member

Board Member National Bank of Abu

Dhabi, Executive Director of the Abu
Dhabi Investment Authority

Khalifa Mohamed Al Gobaisi

1998

Board Member

General Manager of Abu Dhabi

Petroleum Ports Operating Co.

Obaid Ghanim Al Mutawei

1998

Board Member

Chairman of Al Jadaf Ship Docking

Yard, President of the Al Mutaiwie
Group, Board Member of Sharjah
Insurance Company, Umm Al Quwain
Cement Company

Abdul Raouf Al Bitar

2004

Board Member

Managing Director of Al Manhal

Water Factory, Board Member of
SPPI

Mubarak Rashed Al Mansouri

2005

Board Member

Director General of Abu Dhabi

Retirement Pensions and Benefits
Fund, Board Member Arab
International Bank, Egypt, Arab
Banking Corporation, Bahrain, Abu
Dhabi Holding Co., Abu Dhabi
National Company for Building
Materials

Other senior management

Directors
Name

Joined

Position

Dany Safi

1998*

Chief Executive Officer

Karl Marietta

1998

Chief Financial Officer

James Matthew Kassim

2005

Operations &
Maintenance Director

Thani Al Rumaithi

2005

Human Resources &

Administration Director

Majed Fahmy

2001

Project Director

Sandeep Arora

1998* Financial Controller

Yaslam Omar Hassan

1999

Procurement Manager

Jamal Al Jarwan

2001

Marketing Manager
Dubai & N. Emirates

Fawaz Elhindi

2003

Marketing Manager
Abu Dhabi & Al Ain

Issa Cattan

1999

IT Manager

Note:
*1995 with Gulf Energy Systems LLC

The business address of each of the directors and senior management is PO Box 32444, Dubai, UAE.
Directors
*
Mohamed Saif Al Mazrouie, Chairman, has a BA in Business Administration from Laverne
University, California, USA. He is currently Chief Executive Officer of the UAE Offsets Group
and is chairman and a board member of many financial, commercial and industrial
organisations in the UAE.
*

Khalifa Mohammed Al Kindi, Vice Chairman, holds a Bachelor of Science (Economics) degree
from the East Michigan University, USA. He is the Chairman of National Bank of Abu Dhabi
(NBAD), the Deputy Managing Director of Abu Dhabi Investment Authority (ADIA), and
has been on the Board of Directors of ADIA, ADIC, Abu Dhabi Aviation, International
Petroleum Investment Company (all in Abu Dhabi) and Arab Banking Corporation in Bahrain.
62

Dany Safi, Chief Executive Officer, has a BSc in Electrical Engineering and MSc in Mechanical
Engineering. He has held senior management positions in leading air-conditioning companies in
the Middle East. He is a member of several international industry associations and is also a
Board Member of the International District Energy Association.

Mohamed Darwish Al Qamzi, Board Member, was previously a project manager in the UAE
Offsets Group. He has also previously held managerial positions in leading companies in the
UAE. He serves on the Boards of a number of Tabreeds subsidiary and associate companies
(e.g. Qatar Cool, Tabreed Bahrain, Tabreed Saudi, SLGC, EPPI). He has a BSc in Economics
from Laverne University, California, USA.

Ahmed Ateeq Al Mazrouei, Board Member, has a BSc in Finance and an MBA from Indiana
State University, USA. He is also a Chartered Financial Analyst. He is currently on the Board
of NBAD and an Executive Director of ADIA.

Khalifa Mohamed Al Gobaisi, Board Member, has held managerial positions in the UAE
Government and leading UAE companies. He has a BA in Political Sciences from St. Martin
University, Washington, USA. He is currently General Manager of Abu Dhabi Petroleum Ports
Operating Co.

Obaid Ghanim Al Mutawei, Board Member, has a degree in Electrical Engineering. He has held
several senior positions in oil companies, engineering and consulting companies and the Dubai
Government. He is currently the chairman of Al Jadaf Ship Docking Yard and is the founder
and President of the Al Mutaiwie Group.

Abdul Raouf Al Bitar, Board Member, has a degree in Civil Engineering from Syracuse
University, USA. He is the Managing Director of the Al Manhal Water Factory, Riyadh, KSA,
and is a Board Member of SPPI and several companies in KSA and Jordan.

Mubarak Rashed Al Mansouri, Board Member, has a BSc in Finance and an MBA from
University of West Florida, USA. He is Director General of Abu Dhabi Retirement Pensions
and Benefits Fund, and serves on the Boards of Arab International Bank, Egypt, Arab Banking
Corporation, Bahrain, Abu Dhabi Holding Co.

Other Senior Management

Dany Safi, Chief Executive Officer (see Directors above).

*
*

Karl Marietta, Chief Financial Officer, has 34 years of experience in the district energy and
electric utility industries. He is a member of the International District Energy Association. He
has a BSc from Carnegie-Mellon University, USA and an MBA from Metropolitan University,
Minnesota, USA.

James Matthew Kassim, Operations & Maintenance Director, has a BSc in Chemical Engineering
from the University of Tulsa, Oklahoma, USA. He has over 20 years experience in a variety of
industries, and is a member of the Chemical Engineering Society and Mechanical Engineering
Society.

Thani Al Rumaithi, Human Resources & Administration Director, has a BA in Business

Management from Marylhurst University, Oregon, USA. He has 9 years previous experience in
the HR and Administration departments of leading companies. He is a member of the Society
of Human Resource Management and the American Society of Training and Development.

Majed Fahmy, Projects Director, has a BSc in Mechanical Engineering, with 30 years experience
in power plants, air liquefaction industries, and designing of commercial and industrial
mechanical and HVAC systems. He has experience with planning, cost control and management.

Sandeep Arora, Financial Controller, holds a Bachelor of Commerce degree from St. Xaviers
College, University of Calcutta, India, and is a Chartered Accountant from the Institute of
Chartered Accountants of India. He has held positions in international accounting and
consulting firms, and has experience with large contracting companies.

Yaslam Omar Hassan, Procurement Manager, has a BSc in Mechanical Engineering from Nebier
University, Scotland. He has extensive procurement experience and has held several managerial
positions in leading companies.

Jamal Al Jarwan, Marketing Manager Dubai & Northern Emirates, has a BSc in Management.
He has extensive experience in marketing, business management and real estate, and has held
several managerial positions in Government departments.
63

Fawaz Elhindi, Marketing Manager Abu Dhabi & Al Ain, has a BSc in Mechanical Engineering
from the University of Louisiana, USA. He has over 20 years experience in sales and marketing
working for leading multinationals in the Middle East. He is a member of the American Society
of Mechanical Engineers.

Issa Cattan, IT Manager, has a BSc in Economic and Computer Science from Yarmouk
University, Jordan. He has extensive experience with computers and has held managerial
positions in leading computer system companies.

There are no potential conflicts of interest between the duties to Tabreed of the persons listed above
and their private interests or other duties.
Employees
Tabreed had 274 employees as at 31 December 2005, including all its subsidiaries, none of whom are
members of any trade union in any jurisdiction in which Tabreed does business.
In addition to operations in Bahrain, Bahraini nationals are entitled to join labour unions although
Tabreed does not currently anticipate its employees joining any labour union.
Employees who are citizens of the UAE or Bahrain are covered by a federal pension plan. The UAE
employees and the Company contribute on a monthly basis. In Bahrain, only the Company
contributes to the plan (the name of the institution is GOSI General Organization for Social
Insurance). Expatriate employees accrue end of service benefits defined by the Companys Policies and
Procedures, employee contracts and Federal Law. End of service liabilities are accounted for.

Risk Management
Competitive Environment
Tabreed and its district cooling subsidiaries and associates are the leading commercial district cooling
companies in the UAE and the Gulf region.
A recent development is the creation of captive central cooling for most of the major Dubai based
real estate projects. Two joint venture companies have been formed to develop the district cooling for
these projects:
*

Empower: a joint
developments; and

venture

between

DEWA

and

TECOM,

for

the

Dubai

Holdings

Palm District Cooling: a joint venture between the Nakheel Group and Al Ghurair Group, for
the Nakheel Group developments.

Whilst primarily serving a captive market, these companies have attempted to bid for non-captive
contracts as well. To date, Tabreed has not lost any contract that was awarded on a competitive
basis to these companies.
Emaars initial properties did not previously use district cooling, but the company launched a district
cooling subsidiary in 2004 that could potentially serve Emaars new developments in the future.
Tabreeds management is aware of the competition, but takes comfort from the fact that the
Companys medium term growth is protected by signed customer contracts. For growth beyond that,
management expects a substantial portion to come from clearly established further build-out potential
on the signed contracts. Thus, management believes that the next five years growth in assets (and
hence the revenues out of those assets for the following 20 years) is not vulnerable to competitive
pressures. More importantly, competition will not adversely affect cash flows under the existing
contracts, and probably wouldnt affect the (highly profitable) build out of those plants.
Management believes that the main barrier to entry into the district cooling market is the substantial
initial capital and long term financing requirements for development of district cooling projects which
may prove an obstacle to its competitors. But, even so, management considers the market sufficiently
large to accommodate multiple players.
The Company follows an established procedure and tracks the progress through a Scheme Initiation
form. The form is initiated by marketing and if approved by the CEO results in a development
business unit being created with a budget. The form then is processed through the engineering,
projects, operation & maintenance and the finance departments. During this time, approximately six
months, negotiations with the customer are ongoing. If we are successful and a contract is signed and
all the department sign offs have been obtained, the development business unit is converted into a
project business unit with the appropriate capital budget and implementation begins.
64

Marketing district cooling services requires individuals who are comfortable with the technical and
financial issues related to the business. The Company has spent great effort and time in training its
existing marketing personnel. They have been sent to training and conferences in the United States
and Europe. Today the Company has an experienced marketing group and as a result is having
continued success in adding new customers.
The Company has, since its formation, invested in customer education about district cooling services.
It has held conferences and sponsored technical tours. It participates in appropriate conferences and
exhibitions. It has prepared and continually updated promotional brochures and it issues a periodic
news letter. These activities are budgeted for and controlled through the efforts of management and
the budget control tools of the People Soft ERP system.
Financial Policies
Tabreed adopted specific financial policies and procedures in 1999 and has decided to update and
revise those policies and procedures this year.
Tabreed is auditing each operating department and significant subsidiaries and has completed two
departments and is finishing a third. Tabreed intends to implement its own internal audit function
when it has finished the initial audit of each operating department.
Dividend Policy
The Company has the following dividend payout history:
*

2003 cash dividend of 30 fils per share (equivalent to 3% of nominal share value)

2004 cash dividend of 50 fils per share (equivalent to 5% of nominal share value)

2005 stock dividend of 5 fils per share (equivalent to 5% of nominal share value), following a
10:1 stock split.

GCC Corporate Strategy

It is intended that all overseas companies/projects should be self-financing with only equity
participation by Tabreed.
A number of areas in the GCC including, for example, Qatar and Saudi Arabia have been identified
as areas for growth and given Tabreeds market leading status, it is well placed to exploit these
opportunities.
In the next five years, Tabreed intends to focus on both government and non-government customers
before considering expansion into the international markets.
Environment and Safety
The Company complies with all applicable UAE and international environment and safety standards
and has received specific permits from the UAE Federal Environment Research and Wildlife
Development Agency. Tabreed also holds the ISO14001:1996 (environment management),
ISO9001:2000 (quality control) and OHSAS 18001:1999 (occupational health and safety management)
certifications. The standards with which Tabreed has to comply in order to obtain these certifications
are higher than the relevant standards in the UAE.
Legionnaires Disease
The Company is a user of wet cooling towers. In the past, such cooling towers have been a source of
Legionella bacteria which can cause Legionnaires disease. The Company mitigates this risk through
rigorous chemical control of the cooling water. The Company has public liability insurance cover in
relation to legal liability arising from its operations see Public Liability Cover below.
Information Technology
Tabreed uses standard Enterprise Resource Planning software from Peoplesoft for all of its financial,
procurement, human resource, implementation and research modules. The Companys IT network is
linked through all offices and all of the plants.
Insurance
Under UAE law, property located in the UAE and liability thereof cannot be insured abroad, and
therefore, there is no choice but to use UAE registered insurers to front or lead local covers. Such
65

insurers are not awarded ratings as high as insurers located in other jurisdictions. There is, however,
no restriction on reinsurance outside the UAE.
Property Policies
Tabreed has an insurance policy covering property with Abu Dhabi National Insurance Company
(ADNIC). ADNIC is rated A (pi) on Standard & Poors Insurer Financial Strength Rating scale.
The policy covers Property All Risks and Business Interruption cover for the specific plants, based on
standard market forms, and adhere to generally accepted international standards. The policy contains
a specific extension offering indemnity for damaged property on a replacement basis rather than a
cash sum. War risks and cover for acts of terrorism are specifically excluded.
Machinery policies
Tabreed has an insurance policy in respect of machinery with ADNIC.
The policy covers machinery breakdown and applies to the locations of all existing plants. The cover
offered under this policy is standard market form and adheres to generally accepted international
standards. The basis of indemnity offers reinstatement with no depreciation, but no betterment. Cover
for acts of terrorism is, however, specifically excluded.
The policy also covers loss of profit due to breakdown of machinery. The policy does not specifically
list any locations within the UAE, but gives cover for any location within the geographical boundary
of the UAE. The cover offered under this policy is standard market form and adheres to generally
accepted international standards. Cover for acts of terrorism is, however, specifically excluded.
Construction Policies
All of the Companys plants are construction are fully covered under the policy of the relevant
contractor, until such time as the plant has been completely handed over to Tabreed.
Workmans Compensation
Tabreed has an insurance policy in respect of workmans compensation with Oman Insurance
Company (OIC). OIC is rated BBB on Standard & Poors Insurer Financial Strength Rating scale.
The policy covers Annual Workmans Compensation for all staff working within the UAE in line
with UAE market standards.
Public Liability Cover
Tabreed has one policy with ADNIC for all legal liabilities arising out of its operations in line with
UAE market standards. This cover extends to liabilities of up to US$10 million and, to date, there
have been no material claims made by Tabreed under its insurance policy.

Hedging
Most of the Companys financings, other than a sukuk offering in 2004 which is fixed rate, are
floating rate exposures. The total amount of floating rate exposure as on 31 December 2005 was
AED 676 mn out of a financing total of AED 1,071 mn (i.e. 63%). The Company has entered into a
range of interest rate hedging instruments for full or partial protection against adverse movements in
interest rates on these exposures. The total notional amounts under the hedges add up to $289 mn or
AED 1,062 mn (this appears to be more than the total amount of floating rate loans, because in
some cases multiple hedges are linked to the same loan, offering protection at different interest rate
bands).

Regulation
Whilst there are no industry specific regulatory bodies, Tabreed endeavours to comply with all
relevant regulations set by the following:
*

Securities & Commodities Authority;

the Ministry of Economy & Planning; and

the Dubai Financial Market.

66

TABREED 06 FINANCING CORPORATION

Introduction
The Issuer was incorporated in the Cayman Islands on 7 June 2006 as an exempted limited company
limited by shares under the Companies Law (2004 Revision) under the name Tabreed 06 Financing
Corporation and its registered office address is Walker House, PO Box 908GT, Mary Street, George
Town, Grand Cayman, Cayman Islands, telephone number +1345 945 3727.
Business of the Issuer
The Issuers entire issued share capital is held by Walkers SPV Limited of Walker House, PO Box
908GT, Mary Street, George Town, Grand Cayman, Cayman Islands under the terms of a charitable
purpose trust dated 18 July 2006. The sole purpose of the issuer is to issue the Certificates and enter
into the transactions contemplated by the Transaction Documents. As at the date of the Prospectus,
the Issuer has not commenced business.
Share Capital of the Issuer
The Issuer has no subsidiaries. The Issuer is authorised to issue up to 1,000 shares of US$1.00 par
value.
As at the date of this Prospectus, the Issuer had issued 1,000 Shares at an agreed price of US$1.00
each.
Corporate Administration
Walkers SPV Limited of Walker House, PO Box 908GT, Mary Street, George Town, Grand Cayman,
Cayman Islands will act, or procure that a subsidiary acts, as the administrator of the Issuer pursuant
to the terms of a corporate services agreement to be entered into between the Issuer and Walkers
SPV Limited. In consideration of the foregoing, Walkers SPV Limited will be entitled to receive
various fees payable by the Issuer at rates agreed upon from time to time, plus expenses.
Management and Employees
The Issuer has no employees other than those directors listed below in the section entitled
Directors.
Directors
The directors of the Issuer and their other principal activities at the date hereof are as follows:
Name
David Egglishaw
John Cullinane
Derrie Boggess

Other principal activities

Managing Director, Walkers SPV Limited
Director, Walkers SPV Limited
Director, Walkers SPV Limited

The business address of the directors is Walker House, PO Box 908GT, Mary Street, George Town,
Grand Cayman, Cayman Islands.
Directors Interests
No director has any interest in the promotion of, or any property acquired or proposed to be
acquired by, the Issuer and no director has any conflict of interest and/or any potential conflict of
interest between any of its duties to the Issuer and its private interests and/or other duties. As a
matter of Cayman Islands law, each director is under a duty to act honestly and in good faith with a
view to the best interests of the Issuer, regardless of any other directorships he may hold.
Financial Statements and Auditors Report
The Issuer will prepare and publish audited financial statements on an annual basis. The Issuer does
not intend to prepare interim financial statements. As at the date hereof, the Issuer has not yet
prepared any financial statements.
It is anticipated that the Issuer will have an accounting reference date of 31 December with the first
fiscal year ending 31 December 2006. The auditors appointed in respect of the Issuer are Ernst &
Young, public accountants, PO Box 510GT, Grand Cayman, Cayman Islands.
67

The audited annual financial statements will be available free of charge at the offices of the Issuer
and Walkers SPV Limited.

68

TAXATION
The following is a general description of certain tax considerations relating to the Certificates. It does
not purport to be a complete analysis of all tax considerations relating to the Certificates. Prospective
purchasers of Certificates should consult their tax advisers as to the consequences under the tax laws of
the country of which they are resident for tax purposes of acquiring, holding and disposing of
Certificates and receiving payments of profit, principal and/or other amounts under the Certificates. This
summary is based upon the law as in effect on the date of this Prospectus and is subject to any change
in law that may take effect after such date.

United Kingdom Taxation

The following paragraphs are based on the Issuers understanding of United Kingdom law and HM
Revenue & Customs published practice as at the date hereof. They describe the United Kingdom
withholding tax treatment of payments under the Certificates and the extent to which United
Kingdom stamp duty and stamp duty reserve tax would be payable on the issue, transfer and
redemption of the Certificates.
The comments made below do not deal with other United Kingdom tax aspects of acquiring, holding
or disposing of Certificates. Those comments are made on the basis of the following assumptions,
that:
(a)

the Issuer is not resident in the United Kingdom for United Kingdom tax purposes;

(b)

no register of the Certificates is kept in the United Kingdom by or on behalf of the Issuer; and

(c)

no payment to the Certificateholders, including any Periodic Distribution Amount, has a United
Kingdom source for United Kingdom tax purposes.

Those comments relate only to the position of persons who are absolute beneficial owners of the
Certificates.
The following is a general guide and should be treated with appropriate caution. Certificateholders
who are in any doubt as to their tax position should consult their professional advisers.
Certificateholders who may be liable to taxation in jurisdictions other than the United Kingdom in
respect of their acquisition, holding or disposal of the Certificates are particularly advised to consult
their professional advisers as to whether they are so liable (and if so under the laws of which
jurisdictions), since the following comments relate only to certain United Kingdom taxation aspects in
respect of the Certificates. In particular, Certificateholders should be aware that they may be liable to
taxation under the laws of other jurisdictions in relation to payments in respect of the Certificates
even if such payments may be made without withholding or deduction for or on account of taxation
under the laws of the United Kingdom.
United Kingdom Withholding Tax
Periodic Distribution Amounts will be payable without withholding or deduction for or on account of
United Kingdom tax.
Information Reporting
Certificateholders who are individuals may wish to note that where any Periodic Distribution Amount
is paid to them (or to any person acting on their behalf) in respect of the Certificates by the Issuer,
or paid by any person in the United Kingdom acting on behalf of the Issuer (a paying agent), or is
received by any person in the United Kingdom acting on behalf of the relevant Certificateholder
(other than solely by clearing or arranging the clearing of a cheque) (a collecting agent), then the
Issuer or a paying agent (as the case may be) may, in certain cases, be required to supply to HM
Revenue & Customs details of the payment and certain details relating to the Certificateholder
(including the Certificateholders name and address). These provisions will apply whether or not the
payment has been paid subject to withholding or deduction for or on account of United Kingdom
income tax and whether or not the Certificateholder is resident in the United Kingdom for United
Kingdom tax purposes. Where the Certificateholder is not so resident, the details provided to HM
Revenue & Customs may, in certain cases, be passed by HM Revenue & Customs to the tax
authorities of the jurisdiction in which the Certificateholder is resident for taxation purposes.
69

United Kingdom Stamp Duty (Stamp Duty) and Stamp Duty Reserve Tax (SDRT)
No Stamp Duty or SDRT is payable on the issue, transfer or redemption of a Certificate. Any
instrument transferring a Certificate on the sale of the Certificate which is executed in the United
Kingdom or which (if not executed in the United Kingdom) relates to any matter or thing done or to
be done in the United Kingdom will be stampable at 0.5 per cent. of the sale consideration.
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are
required to provide to the tax authorities of another Member State details of payments of interest (or
similar income, which may include Periodic Distribution Amounts) paid by a person within its
jurisdiction to an individual resident in that other Member State. However, for a transitional period,
Belgium, Luxembourg and Austria are instead required (unless during that period they elect
otherwise) to operate a withholding system in relation to such payments (the ending as of such
transitional period being dependent upon the conclusion of certain other agreements relating to
information exchange with certain other countries). A number of non-EU countries and territories
including Switzerland have adopted similar measures (a withholding system in the case of Switzerland)
with effect from the same date.

United Arab Emirates Taxation

The following summary of the anticipated tax treatment in the UAE in relation to the payments on
the Certificates is based on the taxation law and practice in force at the date of this document, and
does not constitute legal or tax advice and prospective investors should be aware that the relevant
fiscal rules and practice and their interpretation may change. Prospective investors should consult
their own professional advisers on the implications of subscribing for, buying, holding, selling,
redeeming or disposing of Certificates and the receipt of interest and distributions (whether or not on
a winding-up) with respect to such Certificates under the laws of the jurisdictions in which they may
be liable to taxation.
There is currently in force in the Emirates of Abu Dhabi and Dubai legislation establishing a general
corporate taxation regime (the Abu Dhabi Income Tax Decree 1965 (as amended) and the Dubai
Income Tax Decree 1969 (as amended)). The regime is, however, not enforced save in respect of
companies active in the hydrocarbon industry, some related service industries and branches of foreign
banks operating in the United Arab Emirates. It is not known whether the legislation will or will not
be enforced more generally or within other industry sectors in the future. Under current legislation,
there is no requirement for withholding or deduction for or on account of UAE, Abu Dhabi or
Dubai taxation in respect of payments of interest or principal on debt securities (including Periodic
Distribution Amounts or the Dissolution Amounts in relation to the Certificates).
The Constitution of the UAE specifically reserves to the federal government of the UAE the right to
raise taxes on a federal basis for purposes of funding its budget. It is not known whether this right
will be exercised in the future.
The United Arab Emirates has entered into Double Taxation Arrangements with certain other
countries, but these are not extensive in number.

Cayman Islands Taxation

There are no income, corporation, capital gains or other taxes in effect in the Cayman Islands on the
basis of present legislation. The Issuer has applied for and expects to obtain an undertaking from the
governor-in-cabinet of the Cayman Islands, pursuant to the Tax Concessions Law (revised) of the
Cayman Islands, that for a period of 20 years from the date of grant of that undertaking no law
which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or
appreciation shall apply to the Issuer or its operations and, in addition, that no tax to be levied on
profits, income, gains or appreciations which is in the nature of estate duty or inheritance tax shall be
payable on or in respect of the shares, debentures or other obligations (which includes the
Certificates) of the Issuer or by way of the withholding in whole or part of any relevant payment. No
capital or stamp duties are levied in the Cayman Islands on the issue, transfer or redemption of
Certificates. An annual registration fee is payable by the Issuer to the Cayman Islands Registry of
Companies which is calculated by reference to the nominal amount of its authorised capital. At
current rates, this annual registration fee is approximately US$575. The foregoing is based on current
law and practice in the Cayman Islands and this is subject to change therein.

70

THE UNITED ARAB EMIRATES

The UAE is a federation of seven emirates made up of Abu Dhabi, Dubai, Sharjah, Ajman, Umm
al-Qaywan, Fujairah and Ras Al-Khaima. Formerly known as the Trucial States, it was a British
protectorate until they achieved independence in December 1971 and merged to form the United
Arab Emirates. Each Emirate has a local government headed by the Ruler of the Emirate. There is a
federal government which is headed by the President. Each emirate enjoys significant autonomy and
has its own budget. The federal budget is principally funded by the two richest Emirates Abu Dhabi
and Dubai.

Location
The UAE is situated along the south-eastern tip of the Arabian Peninsula bordered by Saudi Arabia
to the west and south, and extends to the west coast of the Arabian Gulf from the base of the Qatar
peninsula to Ras Al Khaimah in the north, and across the Musandam peninsula to the Gulf of
Oman in the east, covering an area of 83,699 sq. km. The UAE, with over 700 kilometres of
coastline, has seaports located in both the Arabian Gulf and the Gulf of Oman, which has helped to
establish it as a leading trading hub.

Political Overview
The original constitution of the UAE was initially provisional and provided the legal framework for
the Federation. The constitution was made permanent pursuant to a constitutional amendment in
December 1996 (which also confirmed Abu Dhabi as the permanent capital of the UAE Federation).
The major principle adopted by the Constitution was that jurisdiction for enacting substantive
legislation was confined to the federal government, but the local governments of the seven Emirates
were authorised to regulate those matters that were not the subject of legislation by the federal
government. Consequently, the individual Emirates have exclusive jurisdiction in overall matters,
including those relating to municipal work and natural resources.
The Constitution provided for the establishment of the Supreme Council of the Rulers of all the
Emirates as the foremost authority in the Federation and a Council of Ministers as the executive
branch of the Federation.
The Federation is governed by the Supreme Council of the Rulers. This is the highest federal
governing body and consists of the rulers of the seven Emirates. The Supreme Council elects from its
own membership the President and the Vice President (for renewable five-year terms). Decisions
relating to substantive matters are decided by a majority vote of five Emirates, provided that the
votes of both Dubai and Abu Dhabi are included in that majority, but matters that are purely
procedural are decided by a simple majority vote.
Policy decisions of the Supreme Council are implemented by the Federal Council of Ministers,
sometimes referred to as the cabinet. Upon the approval of the Supreme Council, the President
appoints the Prime Minister and the Federal Council of Ministers to assume the countrys executive
authority. Based in Abu Dhabi, the Cabinet is headed by the Prime Minister and consists of the
Deputy Prime Minister and a number of Ministers. These Ministers are normally selected (for no
fixed term) by the approval of the Supreme Council on the recommendation of the Prime Minister.
The Constitution defines the responsibilities of the Cabinet, which include the issuing of regulations,
the preparation of draft laws and the drawing up of the annual federal budget. Although most of the
federal government ministries are based in Abu Dhabi, many also maintain offices in Dubai.
The federal government is entrusted with the task of enacting legislation regulating the principal and
central aspects of the Federation such as foreign affairs, defence, security, the federal judicial system,
federal finance and loans and civil aviation. Federal matters are regulated through a number of
specially created federal ministries which include the Ministries of Foreign Affairs, Defence, Justice,
Finance and Industry and Economy and Commerce. The responsibility for the armed forces in Dubai
has, within the past three years, been transferred to the federal authorities.
The Federal National Council is composed of 40 members of the national community who are
recommended by the ruler of each Emirate. Each Emirate appoints members for a particular number
of seats, with a large proportion of members coming from Abu Dhabi and Dubai (with eight
members each). The members represent the UAE as a whole rather than their individual Emirates.
Although the Federal National Council does not have any legislative powers, it is responsible for,
among other things, considering and reviewing draft federal laws or bills before they are submitted to
71

the President and the Supreme Council for consideration and subsequent enactment. The Federal
National Council can monitor and debate government policy but has no power of veto or
amendment and cannot initiate any legislation itself.
There are three primary sources or types of law in the UAE: federal laws and decrees, local laws and
Sharia. The secondary form of law is trade custom or practice. In the absence of federal legislation
on areas specifically reserved to federal authority, the Ruler or local government will apply his or its
own rules, regulations and practices. As is its right under the Constitution, Dubai, like the Emirate of
Ras Al Khaimah, has elected to maintain its own court system, separate from that of the Federation,
and the courts of Dubai have sole jurisdiction to hear cases brought in Dubai. Although both federal
and Dubai courts have a similar three-tier structure (Court of First Instance, Court of Appeal and
Court of Cassation/Supreme Court), Dubai has retained complete autonomy over its courts in all
matters, which includes the appointment of judges. In accordance with the Constitution, however, the
Dubai courts will first apply federal law where this exists and, in its absence, the laws of Dubai.

Economic Overview
The UAE is the third largest economy in the Arab world after Saudi Arabia and Egypt. Though it
has a more diversified economy than most of the other countries in the Gulf Co-operation Council
(GCC) region, its wealth is largely based on oil and gas. The UAE has approximately 10 per cent.
of proven global oil reserves, which generate approximately one-third of the UAEs gross domestic
product (GDP) and approximately one-half of export earnings.
The performance of the UAE economy during 2003 and 2004 was very strong. GDP is estimated to
have reached US$90 billion in 2004. In addition to record oil prices, the major contribution to GDP
growth was from construction, manufacturing, tourism and the service sectors. The stock markets
reflected the general confidence in the economy and the market capitalisation of listed stocks
increased 50 per cent. in 2004 to reach US$69 billion.
Around 70 per cent. of UAE fiscal revenues come from oil, making government finances vulnerable
to the vagaries of the oil price. Deficits have been a constant feature of public finance since 1986 but
have been financed by investment income rather than borrowings. The use of oil revenues to build up
a large stock of overseas assets has been a long running fiscal policy and has given the UAE a
healthy net asset position of around 15 per cent. of GDP.
Abu Dhabi is the richest and largest of the seven emirates and the city of Abu Dhabi is also the
capital of the federation. During his long presidency, H.H. Sheikh Zayed oversaw massive investment
in the infrastructure of the UAE, which has transformed the country.

Credit Rating
Moodys Investors Service, Inc. recognised the strong performance and growing strength of the UAE
economy by upgrading the long-term foreign currency rating bonds and bank deposits to A-1 from
A-2 and the short-term foreign currency rating to Prime-1 from Prime-2.

Membership of International Organisations

The UAE has ratified several international treaties and is a member of various organisations
including, inter alia, the United Nations, the Arab League, the Arab Gulf Cooperation Council, the
Organisation of Islamic Countries, the Organisation of Arab Petroleum Exporting Countries, the
Organisation of Petroleum Exporting Countries, the World Health Organisation, the International
Monetary Fund, the International Organisation for Industrial Development, the World Trade
Organisation and Asia-Pacific Economic Cooperation.
The UAE enjoys good relations with the other states in the GCC. However, it does have a longstanding regional dispute with Iran over three islands in the Gulf and, as such, is not immune to the
political risks that have over-shadowed the region.

The Emirate of Dubai

Dubai started as a pearl and fishing village sometime in the first half of the 18th century. From the
1850s until the formation of the UAE, the British were the dominant influence in the region, and
each Emirate entered into a separate treaty with them. The Emirates were then collectively known as
the Trucial States or Sheikhdoms until the area was generally known as the Trucial Coast. The
Sheikhdoms were each led by a sheikh, who usually belonged to the most influential tribe in that
area.
72

The growth of Dubai began in the early part of the 19th century when members of the Bani Yas
tribe, led by Sheikh Maktoum Bin Butti, left Abu Dhabi and migrated north to found an
independent Sheikhdom in the area now known as Dubai.
As the 19th century unfolded, Dubai, split by a 14 kilometre long creek, which led into a natural
harbour, established itself as a flourishing centre for the import and re-export of merchandise (the
entrepot trade). If entrepot trade was the first and most important pillar of Dubais economic
activity, the second was pearling. Offshore from Dubai and Abu Dhabi, the waters were rich with
pearl beds. However, the Great Depression of the 1930s and the emergence of artificial pearls in 1929
dented Dubais prosperity.
To counter the loss of economic activity from the decline in pearling, Dubai enticed traders from
India and Iran to establish their business. Traders, attracted by Dubais liberal policies, especially its
lower taxes on foreigners compared to its neighbours, made it their base and Dubai was quickly
established as a trading centre for trade in gold bullion, textiles and consumer durables.
In the 1930s and 1940s, oil was discovered in Kuwait, Qatar and Saudi Arabia adding to that
already found in Iran, Iraq and Bahrain. In 1958, oil was found off the shore of Abu Dhabi and, in
1966, oil was first discovered by the Dubai Petroleum Company at Fateh, which lies 92 kilometres off
the coast of Dubai. As the primary regional trading hub, Dubai was well placed to capitalise on the
upswing in Middle East business activity that came with oil exports. Over the years, oil revenues have
been used to create and develop the economic and social infrastructure of Dubai.
Dubai is, after the Emirate of Abu Dhabi, the largest emirate in the UAE, and is situated on the
west coast of the UAE in the south western part of the Arabian Gulf. It covers an area of 3,885 sq.
kilometres and lies approximately at longitude 55 degrees East and latitude 25 degrees North. Except
for a tiny enclave in the Hajar Mountains at Hatta, the emirate of Dubai comprises one contiguous
block of territory.
Dubais strategic position at the crossroads between the East and West has helped establish it as a
leading trading and services hub between the Far East and Europe.
Dubais economy is more diversified and dynamic than that of Abu Dhabi and it is one of the most
important commercial centres in the Middle East, with growing banking, tourism and real estate
sectors. However, with only a fraction of the fossil fuel reserves of Abu Dhabi, it has gradually
reduced its dependency on oil and gas revenues. The Government of Dubai continues to invest
heavily in the infrastructure of the emirate and its economic development.
All powers of government in Dubai are vested in the Ruler. The various departments and other arms
of the government and their respective executives operate under the powers and responsibilities
specifically delegated to them from time to time by the Ruler. Laws of Dubai are passed by decree of
the Ruler. The present Ruler is H.H. General Sheikh Mohammed bin Rashid Al Maktoum, who is
also chairman of Dubais Executive Council.
In Dubai, there are various local government bodies charged with regulating and administering local
law and policy, including the Dubai Department of Economic Development, Dubai Municipality and
the Department of Civil Aviation.
The population of Dubai was estimated at 1,204,000 at the end of 2003. There are no figures
currently available for 2004 or 2005. Approximately 80 per cent. of the population is estimated to be
non-UAE nationals, mainly drawn from the Indian subcontinent, Europe and other Arab countries.
Approximately 70 per cent. of the population is estimated to be male and 30 per cent. female,
reflecting the large male expatriate workforce.

73

SUBSCRIPTION AND SALE

Each of the managers named in the table below (the Managers) have, pursuant to a Certificate
Purchase Agreement dated 18 July 2006, severally agreed with the Issuer, subject to the satisfaction of
certain conditions, to subscribe for the Certificates for the face amount of Certificates set opposite its
name in the table below at the issue price of 100.00 per cent. of their face amount. Tabreed has
agreed to pay to the Managers certain commissions for acting in such capacity. In addition, Tabreed
has agreed to reimburse the Joint Lead Managers for certain of their expenses in connection with the
issue of the Certificates. The Certificate Purchase Agreement entitles the Managers to terminate it in
certain circumstances prior to payment in respect of the Certificates being made to the Issuer.
Managers
CIMB (L) Limited ...........................................................................................................
Dresdner Bank AG London Branch................................................................................
HSBC Bank plc................................................................................................................
ABC Islamic Bank (E.C.) ................................................................................................

Face Amount
(US$)
66,000,000
66,000,000
66,000,000
2,000,000

Total .................................................................................................................................

US$200,000,000

United States
The Certificates have not been and will not be registered under the Securities Act and, subject to
certain exceptions, may not be offered or sold within the United States. The Certificates are being
offered and sold outside the United States in reliance on Regulation S of the Securities Act.
In addition, until 40 days after the commencement of the offering of the Certificates, an offer or sale
of the Certificates within the United States by any dealer (whether or not participating in the
offering) may violate the registration requirements of the Securities Act. Terms used in this paragraph
have the meaning given to them by Regulation S under the Securities Act.
United Kingdom
Each Manager has represented, warranted and agreed that:
(a)

it has only communicated or caused to be communicated and will only communicate or cause to
be communicated any invitation or inducement to engage in investment activity (within the
meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received
by it in connection with the issue or sale of any Certificates in circumstances in which section
21(1) of the FSMA does not apply to the Issuer; and

(b)

it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the Certificates in, from or otherwise involving the United
Kingdom.

Cayman Islands
The Certificates have not been and will not be offered or sold or purchased or held by persons
resident in the Cayman Islands.
United Arab Emirates
Each of the Managers has represented and agreed:
(a)

the Certificates have not been and will not be offered, sold or publicly promoted or advertised
by it in the United Arab Emirates other than in compliance with any laws application in the
United Arab Emirates governing the issue, offering the sale of securities; and

(b)

the information contained in this Prospectus does not constitute an offer of securities in the
United Arab Emirates in accordance with the Commercial Companies Law (Federal Law No. 8
of 1986 (as amended)) or otherwise and is not intended to be a public offer and the information
contained in the Prospectus is not intended to lead to the conclusions of any contract of
whatsoever nature within the territory of the United Arab Emirates.
74

Saudi Arabia
Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a Saudi Investor) who
acquires Certificates pursuant to the offering should note that the offer of Certificates is an exempt
offer under sub-paragraph (3) of paragraph (a) of Article 16 of the Offer of Securities Regulations
as issued by the Board of the Capital Market Authority resolution number 2-11-2004 dated 4 October
2004 and amended by resolution of the Board of the Capital Market Authority resolution number 133-2004 dated 21 December 2004 (the KSA Regulations). The Certificates may be offered to no
more than 60 Saudi Investors and the minimum amount payable per Saudi Investor must be not less
than Saudi Riyal (SR) 1 million or an equivalent amount. The offer of Certificates is therefore
exempt from the public offer of the KSA Regulations, but is subject to the following restrictions on
secondary market activity:
(a)

A Saudi Investor (the transferor) who has acquired Certificates pursuant to this exempt offer
may not offer or sell Certificates to any person (referred to as a transferee) unless the price to
be paid by the transferee for such Certificates equals or exceeds SR1 million.

(b)

If the provisions of paragraph (a) cannot be fulfilled because the price of the Certificates being
offered or sold to the transferee has declined since the date of the original exempt offer, the
transferor may offer or sell the Certificates to the transferee if their purchase price during the
period of the original exempt offer was equal to or exceeded SR1 million.

(c)

If the provisions of (a) and (b) cannot be fulfilled, the transferor may offer or sell Certificates if
he/she sells his entire holding of Certificates to one transferee.

(d)

The provisions of paragraphs (a), (b) and (c) shall apply to all subsequent transferees of the
Certificates.

Kuwait
Each Manager has represented and agreed that no marketing or sale of the Certificates may take
place in Kuwait unless the same has been duly authorised by the Kuwait Ministry of Commerce and
Industry pursuant to the provisions of Law No. 31/1990 and the various ministerial regulations issued
thereunder.
Bahrain
Each Manager has represented, warranted and undertaken that it has not offered and will not offer,
Certificates to the Public (as defined in Articles 162-146 of the Commercial Companies Law (decree
Law No. 21/2001) of Bahrain) in Bahrain.
Singapore
The Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore
(the MAS) under the Securities and Futures Act (Cap. 289) (the Securities and Futures Act).
Accordingly, the Certificates may not be offered or sold or made the subject of an invitation for
subscription or purchase nor may the Prospectus or any other document or material in connection
with the offer or sale, or invitation for subscription or purchase of the Certificates be circulated or
distributed, whether directly or indirectly, to the public or any member of the public in Singapore
other than: (i) to an institutional investor or other person falling within Section 274 of the Securities
and Futures Act; (ii) to a sophisticated investor as defined, and in accordance with the conditions
specified, in Section 275 of the Securities and Futures Act; or (iii) pursuant to, and in accordance
with the conditions of, any other applicable exemption under the Securities and Futures Act.
Where the Certificates are subscribed or purchased under Section 275 by a relevant person which is:
(i)

a corporation (which is not an accredited investor) the sole business of which is to hold
investments and the entire share capital of which is owned by one or more individuals, each of
whom is an accredited investor; or

(ii)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold
investments and each beneficiary is an accredited investor, shares, debentures and units of shares
and debentures of that corporation or the beneficiaries rights and interest in that trust shall not
be transferable for six months after that corporation or that trust has acquired the Certificates
under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a
75

relevant person, or any person pursuant to Section 275(1A), and in accordance with the
conditions specified in Section 275 of the SFA; (2) where no consideration is given for the
transfer; or (3) by operation of law.
Hong Kong
Each Manager has represented and agreed that:
(a)

it has not offered or sold and will not offer or sell in Hong Kong, by means of any document,
the Certificates other than (i) to persons whose ordinary business is to buy or sell shares or
debentures (whether as principal or agent); or (ii) in other circumstances which do not result in
the document being an offer to the public within the meaning of the Companies Ordinance
(Cap. 32) (the CO); or (iii) to professional investors within the meaning of the Securities
and Futures Ordinance (Cap. 571) (the SFO) and any rules made under the SFO; or (iv) in
other circumstances which do not result in the document being a prospectus which do not
constitiute an offer to the public within the meaning of the CO; and

(b)

it has not issued or had in its possession for the purposes of issue, and will not issue or have in
its possession for the purposes of issue (in each case whether in Hong Kong or elsewhere), any
advertisement, invitation or document relating to the Certificates, which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the laws of Hong Kong) other than with respect to the Certificates
which are or are intended to be disposed of only to persons outside Hong Kong or only to
professional investors within the meaning of the SFO and any rules made under the SFO.

Malaysia
Each Manager has acknowledged that the offer of the Certificates in Malaysia can only be made to
investors specified in Schedules 2, 3 and 5 of the Securities Commission Act 1993 (i.e. sophisticated
investors, e.g. unit trust schemes, licensed dealers, closed-end funds, fund managers, licensed financial
institutions, licensed offshore banks, licensed insurance companies, corporations with total net assets
exceeding ten million Malaysian ringgit or its equivalent in foreign currencies, statutory bodies and
pension funds).
Dubai International Financial Centre
The Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the
Dubai Financial Services Authority (DFSA). It is intended for distribution only to persons of a
type specified in those rules. It must not be delivered to, or relied on by, any other person. The
DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt
Offers. The DFSA has not approved this document nor taken steps to verify the information set out
in it and has no responsibility for it. The securities to which this document relates may be illiquid
and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should
conduct their own due diligence on the securities. If you do not understand the contents of this
document you should consult an authorised financial adviser.
General
No action has been taken by the Issuer or any of the Managers that would, or is intended to, permit
a public offer of the Certificates or possession or distribution of the Prospectus or any other offering
or publicity material relating to the Certificates in any country or jurisdiction where any such action
for that purpose is required. Accordingly, each Manager has undertaken that it will not, directly or
indirectly, offer or sell any Certificates or distribute or publish any offering circular, prospectus, form
of application, advertisement or other document or information in any country or jurisdiction except
under circumstances that will, to the best of its knowledge and belief, result in compliance with any
applicable laws and regulations and all offers and sales of Certificates by it will be made on the same
terms.

76

GENERAL INFORMATION
1.

It is expected that listing of the Certificates on the Official List and admission of the Certificates
to trading on the Market will be granted on or before 20 July 2006, subject only to the issue of
the Global Certificate. Prior to official listing and admission to trading, however, dealings will
be permitted by the London Stock Exchange in accordance with its rules. Transactions will
normally be effected for settlement in U.S. dollars and for delivery on the third working day
after the day of the transaction. The Certificates will be governed by English law and, under the
Declaration of Trust, the Issuer will submit to the non-exclusive jurisdiction of the courts of
England.

2.

The Issuer has obtained all necessary consents, approvals and authorisations in the Cayman
Islands in connection with the issue and performance of the Certificates. The issue of the
Certificates was authorised by the directors of the Issuer passed on 13 July 2006. The entry into
the Transaction Documents to which it is a party was authorised by the directors of Tabreed on
8 July 2006.

3.

There has been no significant change in the financial or trading position of the Issuer since its
date of incorporation and no material adverse change in the financial position or prospects of
the Issuer since the date of its incorporation.

4.

There has been no significant change in the financial or trading position of Tabreed since 31
March 2006 and no material adverse change in the financial position or prospects of Tabreed
since 31 December 2005.

5.

The Issuer is not or has not been involved in any governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which the Issuer is aware)
during the 12 months preceding the date of this Prospectus which may have or have had in the
recent past significant effects on the financial position or profitability of the Issuer.

6.

Tabreed is not or has not been involved in any governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which Tabreed is aware)
during the 12 months preceding the date of this Prospectus which may have or have had in the
recent past significant effects on the financial position or profitability of Tabreed.

7.

The Certificates have been accepted for clearance through the Euroclear and Clearstream,
Luxembourg systems (which are the entities in charge of keeping the records) with a Common
Code of 025840496. The International Securities Identification Number (ISIN) for the
Certificates is XS0258404960.
The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the
address of Clearstream, Luxembourg is 42 Avenue JF Kennedy L-1855 Luxembourg.

8.

Where information in this Prospectus has been sourced from third parties this information has
been accurately reproduced and as far as the Issuer is aware and is able to ascertain from the
information published by such third parties no facts have been omitted which would render the
reproduced information inaccurate or misleading. The source of third party information is
identified where used.

9.

For so long as any Certificates remain outstanding, copies (and English translations where the
documents in question are not in English) of the following documents will be available, during
usual business hours on any weekday (Saturdays and public holidays excepted), for inspection at
the offices of Tabreed and the Paying Agent in London:
(a)

the Transaction Documents (other than the Certificate Purchase Agreement);

(b)

the Memorandum and Articles of Association of the Issuer;

(c)

the published annual report and audited accounts of Tabreed for the two financial years
ended 31 December 2005; and

(d)

the Prospectus.

The Prospectus will be published on the website of the Regulatory News Service operated by the
London Stock Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews/.
10.

Ernst & Young of PO Box 136, Abu Dhabi, UAE Chartered Accountants, have rendered
unqualified audit reports on the accounts of Tabreed for the two years ended 31 December 2004
and 31 December 2005.
77

11.

The expenses relating to the issue of the Certificates are expected to amount to US$1,950,000.

78

FINANCIAL INFORMATION
Page No.
AED Interim Condensed Consolidated Financial Statements Ending 31 March 2006 (unaudited)
Report of Independent Auditors dated 30 April 2006
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to AED Interim Condensed Consolidated Financial Statements

F1
F2
F3
F4
F5
F6
F7

AED Financial Statements Year Ended 31 December 2005

Report of Independent Auditors dated 12 February 2006
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to AED Financial Statements

F11
F12
F13
F14
F15
F16
F17

AED Financial Statements Year ended 31 December 2004

Report of Independent Auditors dated 14 February 2005
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to AED Financial Statements

F40
F41
F42
F43
F44
F45
F46

79

National Central Cooling Company PJSC

INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
31 MARCH 2006 (UNAUDITED)

F-1

ERNST &YOUNG

P.O. Box 136

11th Floor
Al Ghaith Tower
Hamdan Street
Abu Dhabi
United Arab Emirates

Phone: 6277522
Fax:
6273383
www.ey.com/me

REVIEW REPORT TO THE SHAREHOLDERS OF

NATIONAL CENTRAL COOLING COMPANY PJSC
We have reviewed the accompanying consolidated balance sheet of National Central Cooling
Company PJSC (the Company) and its subsidiaries as of 31 March 2006, and the related
consolidated statements of income, cash flows and changes in equity for the three months period then
ended. These interim condensed consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to issue a report on these interim condensed
consolidated financial statements based on our review.
We conducted our review in accordance with the International Standard on Review Engagements
2400. This Standard requires that we plan and perform the review to obtain moderate assurance as to
whether the interim condensed consolidated financial statements are free of material misstatement. A
review is limited primarily to inquiries of the Companys personnel and analytical procedures applied
to financial data, and thus provides less assurance than an audit. We have not performed an audit,
and accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the
accompanying interim condensed consolidated financial statements are not presented fairly, in all
material respects, in accordance with International Accounting Standard No. 34.

Signed by
Bassam E Hage
Partner
Ernst & Young
Registration No. 258
29 April 2006
Abu Dhabi

F-2

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED INCOME STATEMENT
Three months period ended 31 March 2006 (Unaudited)

Notes
Revenues .................................................................................................
Operating costs .......................................................................................
GROSS PROFIT ...................................................................................
Salaries and staff related costs ...............................................................
Other administrative expenses ................................................................
Finance costs ..........................................................................................
Other income ..........................................................................................
Share of results of associates ..................................................................

3
3

PROFIT FOR THE PERIOD

Attributable to:
Equity holders of the parent...............................................................
Minority interests................................................................................

Basic earnings per share .........................................................................

Three
months
ended
31 March
2006
AED 000
107,529
(55,186)

78,551
(37,470)

52,343
(11,173)
(10,945)
(13,488)
7,556
245

41,081
(9,613)
(5,316)
(7,072)
1,595
68

24,538

20,743

17,907
6,631

17,140
3,603

24,538

20,743

0.02

0.02

The attached notes to 1 to 11 form part of these consolidated financial statements.

F-3

Three
months
ended
31 March
2005
AED 000

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED BALANCE SHEET
At 31 March 2006 (Unaudited)
31 March
2006
AED 000

31 December
2005
AED 000

778,824
1,091,073
46,247
38,336
16,953

642,921
1,004,108
46,002
38,336
18,349

1,971,433

1,749,716

18,121
197,994
104,151
49,305
10,120
428,751

17,651
207,007
76,269
69,211
7,453
520,032

808,442
17,867

897,623
17,867

826,309

915,490

2,797,742

2,665,206

1,000,000
(10,050)
14,544
40,788
(400)
16,447
50,000

1,000,000
(10,050)
14,544
22,881

3,800
50,000

Minority interests...........................................................................................................

1,111,329
69,882

1,081,175
64,601

Total equity....................................................................................................................

1,181,211

1,145,776

5,299
450,168
308,809
180,075
131,647
8,562

10,604
393,836
308,809
180,075
132,263
7,884

1,084,560

1,033,471

372,125
119,274
10,881
15,514
14,177

318,919
111,933
25,416
15,514
14,177

531,971

485,959

Total liabilities ...............................................................................................................

1,616,531

1,519,430

TOTAL EQUITY AND LIABILITIES........................................................................

2,797,742

2,665,206

Notes
ASSETS
Non-current assets
Capital work in progress ...............................................................................................
Property, plant and equipment .....................................................................................
Investments in associates...............................................................................................
Intangibles .....................................................................................................................
Prepayments ..................................................................................................................

Current assets
Inventories .....................................................................................................................
Trade and other receivables ..........................................................................................
Financial assets carried at fair value through income statement ..................................
Contract work in progress ............................................................................................
Prepayments ..................................................................................................................
Bank balances and cash ................................................................................................

Assets classified as held for sale ....................................................................................

TOTAL ASSETS ..........................................................................................................

EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital ..................................................................................................................
Treasury shares..............................................................................................................
Statutory reserve............................................................................................................
Retained earnings .........................................................................................................
Foreign currency translation reserve .............................................................................
Cumulative changes in fair value of derivatives............................................................
Reserve for proposed bonus issue .................................................................................

Non-current liabilities
Accounts payable and accruals .....................................................................................
Term loans.....................................................................................................................
Islamic Ijara loans .........................................................................................................
Islamic Istisnaa loans ...................................................................................................
Islamic Muqawala loans................................................................................................
Employees end of service benefits ................................................................................

Current liabilities
Accounts payable and accruals .....................................................................................
Bank overdrafts .............................................................................................................
Current portion of term loans.......................................................................................
Current portion of Ijara loans ......................................................................................
Current portion of Muqawala loans .............................................................................

Mohamed Saif Al Mazrouei

CHAIRMAN

10

8
9
9
9

7
8
9
9

Dany Safi
CHIEF EXECUTIVE OFFICER

The attached notes to 1 to 11 form part of these consolidated financial statements.

F-4

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED STATEMENT OF CASH FLOWS
Three months period ended 31 March 2006 (Unaudited)

Notes

Three
months
ended
31 March
2006
AED 000

Three
months
ended
31 March
2005
AED 000

17,907

17,140

OPERATING ACTIVITIES
Profit for the period attributable to equity holders of the parent ..................
Adjustment for:
Depreciation ................................................................................................
Impairment of plant and equipment ...........................................................
Amortisation of trademarks ........................................................................
Provision for employees end of service benefits (net) ................................
Interest income ............................................................................................
Finance costs ...............................................................................................
Revaluation gain on financial assets carried at fair value through income
statement .....................................................................................................

13,502
197

678
(3,517)
13,488
(2,591)

9,815

4
320
(977)
7,072

39,664

33,374

Working capital changes:

Inventories ...................................................................................................
Accounts receivable and prepayments.........................................................
Contract work in progress...........................................................................
Accounts payable and accruals ...................................................................

(470)
19,989
19,906
47,901

(4,819)
15,245
(6,906)
53,750

Net cash from operations................................................................................

Minority interests ............................................................................................
Finance costs ...................................................................................................

126,990
5,281
(13,488)

90,644
2,397
(7,072)

Net cash from operating activities

118,783

85,969

INVESTING ACTIVITIES
Purchase of property, plant and equipment ...................................................
Investment in associates ..................................................................................
Purchase of financial assets carried at fair value through income statement .
Additions to capital work in progress ............................................................
Interest received...............................................................................................

(5,677)
(245)
(25,291)
(230,890)
3,517

(4,769)
(68)

(139,592)
977

Net cash used in investing activities................................................................

(258,586)

(143,452)

FINANCING ACTIVITIES
Dividends paid ................................................................................................
Term loans received ........................................................................................
Term loans repaid ...........................................................................................
Muqawala loans received ................................................................................
Muqawala loans repaid...................................................................................

57,705
(15,908)

(616)

(25,000)
27,683
(13,963)
14,360
(616)

Net cash from financing activities...................................................................

41,181

2,464

DECREASE IN CASH AND CASH EQUIVALENTS.................................

(98,622)

(55,019)

Cash and cash equivalents at 1 January .........................................................

408,099

227,889

309,477

172,870

CASH AND CASH EQUIVALENTS AT 31 MARCH.................................

Significant non-cash transactions, which have been excluded from the statement of cash flows, are as follows:
Accounts payable and accruals fair value adjustment for derivatives .........

693
Accounts receivable and prepayments fair value adjustment for derivatives
12,647
6,973
Transfer from capital work in progress to property, plant and equipment ...
94,987

Foreign exchange difference............................................................................

(400)

The attached notes to 1 to 11 form part of these consolidated financial statements.

F-5

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Three months period ended 31 March 2006 (Unaudited)
Attributable to equity holders of the parent

Balance at 1 January 2005

(as previously stated) ........................
Effect of adopting IFRS 2 ...................
Reclassification from advance to
employee incentive scheme................

Share
capital
AED 000

Treasury
shares
AED 000

Statutory
reserve
AED 000

500,000

7,914

Retained
earnings
AED 000

Foreign Cumulative
changes in
currency
translation fair value of
derivatives
reserve
AED 000
AED 000

29,669
(1,298)

(6,419)

Proposed
dividend
AED 000

25,000

Total
AED 000
556,164
(1,298)
(5,050)

Minority
interests Total equity
AED 000
AED 000
14,530

(5,050)

500,000

(5,050)

7,914

28,371

(6,419)

25,000

549,816

14,530

564,346

Net movement in fair value of cash

flow hedges........................................

7,667

7,667

7,667

Total income for the period recognised

directly in equity ...............................
Profit for the period .............................

17,140

7,667

7,667
17,140

3,603

7,667
20,743

Total income for the period .................

Dividend paid.......................................

17,140

7,667

24,807
(25,000)

3,603
(1,205)

28,410
(26,205)

Balance at 31 March 2005 ...................

500,000

(5,050)

7,914

45,511

1,248

549,623

16,928

566,551

Balance at 1 January 2006 ...................

Net movement in fair value of cash
flow hedges........................................
Exchange difference arising on
translation of overseas operations ....

1,000,000

(10,050)

14,544

22,881

3,800

50,000

1,081,175

64,601

1,145,776

12,647

12,647

(25,000)

12,647

(400)

17,907

(400)

12,647

12,247
17,907

(400)

12,647

30,154

16,447

50,000

1,111,329

Total income and (expense) for the

period ................................................

17,907

Increase in share capital of subsidiary .

Dividend paid.......................................

Balance at 31 March 2006 ...................

1,000,000

14,544

40,788

(10,050)

(400)

(400)

The attached notes to 1 to 11 form part of these consolidated financial statements.

F-6

570,694
(1,298)

Balance at 1 January 2005 (restated) ...

Total income and (expense) for the

period recognised directly in equity..
Profit for the period .............................

Reserve for
proposed
bonus issue
AED 000

(5,050)

(400)

6,631

12,247
24,538

6,631

36,785

7,350
(8,700)

7,350
(8,700)

69,882

1,181,211

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
31 March 2006 (Unaudited)
1
ACTIVITIES
National Central Cooling Company PJSC (the Company) is registered in the United Arab Emirates
as a Public Joint Stock Company pursuant to the U.A.E. Commercial Companies Law No. 8 of 1984
(as amended). The principal activities of the Company are to construct, own, assemble, install,
operate and maintain cooling and air conditioning systems. In addition, the Companys activities
include the distribution and sale of chilled water for use in district cooling technologies.
The Companys registered office is located at P.O. Box 32444, Dubai, United Arab Emirates.
2
ACCOUNTING POLICIES
The interim condensed consolidated financial statements of the Company and its subsidiaries are
prepared in accordance with International Accounting Standard (IAS) No 34, Interim Financial
Reporting. The accounting policies used in the preparation of the interim condensed consolidated
financial statements are consistent with those used in the preparation of the annual consolidated
financial statements for the year ended 31 December 2005.
The interim condensed financial statements do not contain all information and disclosures required
for full financial statements prepared in accordance with International Financial Reporting Standards.
In addition, results for the three months ended 31 March 2006 are not necessarily indicative of the
results that may be expected for the financial year ending 31 December 2006.
3

SEGMENTAL ANALYSIS
Services
AED 000

Chilled water
AED 000

Contracting Manufacturing
AED000
AED000

Eliminations
AED000

Three months ended 31 March 2006:

Revenue ...................................................
External revenue .....................................
Inter-segment sales..................................

14,708
1,244

37,260

15,400

40,161

(1,244)

107,529

Total revenue...........................................

15,952

37,260

15,400

40,161

(1,244)

107,529

Result ......................................................
Segment result .........................................

6,986

9,977

3,695

11,994

(979)

31,673

Finance costs ..........................................

Interest and investment income ..............
Share of results of associates ..................
Minority interests....................................

245

(13,488)
6,108
245
(6,631)

Profit for the period attributable to equity

holders of the parent ............................

Total
AED000

17,907

Three months ended 31 March 2005:

Revenue ...................................................
External revenue .....................................
Inter-segment sales..................................

7,950
1,699

29,162

19,956

21,483

(1,699)

78,551

Total revenue...........................................

9,649

29,162

19,956

21,483

(1,699)

78,551

Result Segment result ..............................

3,723

11,063

8,473

6,445

(2,934)

26,770

Finance costs ..........................................

Interest income .......................................
Share of results of associates ..................
Minority interests....................................

68

Profit for the period attributable to equity

holders of the parent ............................

(7,072)
977
68
(3,603)

17,140

F-7

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
31 March 2006 (Unaudited)
3

SEGMENTAL ANALYSIS continued

Services
AED 000

Chilled water
AED 000

At 31 March 2006:
Segment assets ...................................................................
Investments in associates...................................................

53,712

2,431,301
46,247

184,206

82,276

2,751,495
46,247

Total assets ........................................................................

53,712

2,477,548

184,206

82,276

2,797,742

Segment liabilities ..............................................................

11,851

1,484,923

86,871

32,886

1,616,531

At 31 December 2005:
Segment assets ...................................................................
Investments in associates...................................................

57,405

2,304,390
46,002

183,319

74,090

2,619,204
46,002

Total assets ........................................................................

57,405

2,350,392

183,319

74,090

2,665,206

Segment liabilities ..............................................................

9,627

1,349,683

138,492

21,628

1,519,430

Three months ended 31 March 2006:

Capital expenditure:
Tangible fixed assets..........................................................

130

5,473

32

42

5,677

Depreciation ......................................................................

112

13,121

41

228

13,502

Three months ended 31 March 2005:

Capital expenditure:
Tangible fixed assets..........................................................

202

4,520

30

17

4,769

Depreciation ......................................................................

52

9,504

40

219

9,815

Other information

Contracting Manufacturing
AED000
AED000

Total
AED000

The Company is organised as one geographical segment and consequently, no secondary information
is required to be provided.
4
BASIC EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the profit for the period attributable to ordinary
equity holders of the parent by the weighted average number of shares outstanding during the period
as follows:
Three
months
ended
31 March
2006
AED 000

Three
months
ended
31 March
2005
AED000

Profit for the period (AED 000) .......................................................................

17,907

17,140

Weighted average number of ordinary shares issued (000) ..............................

1,000,000

814,800

Earnings per share (AED) .................................................................................

0.02

0.02

5
INVESTMENTS IN SUBSIDIARIES
During the period, the Company invested an additional amount of AED 7.6 million in Summit
District Cooling Company, a limited liability company incorporated in the Emirate of Abu Dhabi
representing the Companys share of the increase in share capital of the subsidiary.

F-8

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
31 March 2006 (Unaudited)

PROPERTY, PLANT AND EQUIPMENT

Cost at 31 March 2006.......................................

Land, plant
and
buildings
AED 000
1,193,368

Furniture
and fixtures
AED 000

Office
equipment
and
instruments
AED 000

Motor
vehicles
AED 000

Total
AED 000

6,643

15,553

2,099

1,217,663

(1,229)

Accumulated depreciation at 31 March 2006 ....

(114,135)

(4,147)

(6,882)

(126,393)

Net carrying amount at 31 March 2006 before

provision for impairment................................
Provision for impairment ...................................

1,079,233
(197)

2,496

8,671

870

1,091,270
(197)

Net carrying amount at 31 March 2006 ............

1,079,036

2,496

8,671

870

1,091,073

Net carrying amount at 31 December 2005.......

991,586

2,710

8,851

961

1,004,108

7
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the statement of cash flows include the following balance sheet
amounts:

Bank balances and cash.....................................................................................

Bank overdrafts .................................................................................................

31 March
2006
AED 000
428,751
(119,274)
309,477

31 March
2005
AED 000
219,576
(46,706)
172,870

TERM LOANS

Term loans .........................................................................................................

Other loan..........................................................................................................

Due in less than one year

Term loans .........................................................................................................
Other loan..........................................................................................................

Due in more than one year

Term loans .........................................................................................................
Other loan..........................................................................................................

F-9

31 March 31 December
2006
2005
AED 000
AED 000
460,927
419,097
122
155
461,049

419,252

10,759
122

25,291
125

10,881

25,416

450,168

393,806
30

450,168

393,836

461,049

419,252

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
31 March 2006 (Unaudited)
9

ISLAMIC FINANCING ARRANGEMENTS

31 March 31 December
2006
2005
AED 000
AED 000

Ijara loans ..........................................................................................................

Istisnaa loans ....................................................................................................
Muqawala loans.................................................................................................

Due in more than one year:

Ijara loans ..........................................................................................................
Istisnaa loans ....................................................................................................
Muqawala loans.................................................................................................

Due in less than one year:

Ijara loans ..........................................................................................................
Muqawala loans.................................................................................................

10

324,323
180,075
145,824

324,323
180,075
146,440

650,222

650,838

308,809
180,075
131,647

308,809
180,075
132,263

620,531

621,147

15,514
14,177

15,514
14,177

29,691

29,691

650,222

650,838

SHARE CAPITAL
31 March 31 December
2006
2005
AED 000
AED 000

Authorised and issued share capital

1,000,000,000 (31 December 2005: 1,000,000,000) ordinary shares at AED 1
each................................................................................................................

1,000,000

1,000,000

The Companys authorised share capital was increased to 100,000,000 ordinary shares at the ExtraOrdinary General Meeting held in March 2005 by way of a rights issue. The rights issue was fully
subscribed to at 19 April 2005.
Further, at the Extra-Ordinary General meeting held on July 2005, the shareholders approved the
split of the nominal value of the Companys shares from AED 10 to AED 1.
At the Annual General Meeting held on 20 March 2006, the shareholders approved the proposed
issue of bonus shares. The registration of the bonus shares was completed in the Companys share
register on 3 April 2006.
11 CAPITAL COMMITMENTS
The Board of Directors have authorised future capital expenditure amounting to AED 1,241 million
(31 December 2005: AED 1,241 million).

F-10

National Central Cooling Company PJSC

CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2005

F-11

ERNST &YOUNG

P.O. Box 136

11th Floor
Al Ghaith Tower
Hamdan Street
Abu Dhabi
United Arab Emirates

Phone: 6277522
Fax:
6273383
www.ey.com/me

AUDITORS REPORT TO THE SHAREHOLDERS OF

NATIONAL CENTRAL COOLING COMPANY PJSC
We have audited the accompanying consolidated balance sheet of National Central Cooling Company
PJSC (the Company) and its subsidiaries as of 31 December 2005, and the related consolidated
statements of income, cash flows and changes in equity for the year then ended. These consolidated
financial statements are the responsibility of the Companys management. Our 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 plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company and its subsidiaries as of 31 December 2005 and the results of
their operations and their cash flows for the year then ended in accordance with International
Financial Reporting Standards.
We also confirm that in our opinion 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 in agreement with the books of account. 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 U.A.E. Commercial Companies Law of 1984 (as
amended) or 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
Bassam E Hage
Partner
Registration No. 258
12 February 2006
Abu Dhabi

F-12

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2005
2005
AED 000
400,904
(248,988)

2004
AED 000
242,085
(150,788)

151,916
(30,753)
(37,989)
(606)
(35,433)
20,034
478

91,297
(21,753)
(20,319)
(862)
(20,401)
7,759
(228)

PROFIT FOR THE YEAR....................................................................

67,647

35,493

Attributable to:
Equity holders of the parent...............................................................
Minority interests................................................................................

51,140
16,507

31,585
3,908

67,647

35,493

0.05

0.04

Notes
Revenues .................................................................................................
3
Operating costs .......................................................................................
GROSS PROFIT ...................................................................................
Salaries and staff related costs ...............................................................
Other administrative expenses ................................................................
Amortisation and impairment of goodwill and trademarks...................
Finance costs ..........................................................................................
Other income ..........................................................................................
Share of results of associates ..................................................................

Basic earnings per share .........................................................................

12
4
10

The attached notes 1 to 32 form part of these consolidated financial statements.

F-13

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED BALANCE SHEET
At 31 December 2005
2005
AED 000

2004
AED 000
(Restated)

642,921
1,004,108
46,002
38,336
18,349

331,962
772,894
18,519
30,044
21,988

1,749,716

1,175,407

16

17,651
207,007
76,269
69,211
7,453
520,032

8,418
125,934

70,457
8,184
255,390

Assets classified as held for sale ................................................................................. 2.2 & 9

897,623
17,867

468,383

915,490

468,383

2,665,206

1,643,790

Notes
ASSETS
Non-current assets
Capital work in progress ............................................................................................
Property, plant and equipment...................................................................................
Investments in associates ............................................................................................
Intangibles...................................................................................................................
Prepayments................................................................................................................

Current assets
Inventories ..................................................................................................................
Trade and other receivables........................................................................................
Financial assets carried at fair value through income statement ...............................
Contract work in progress ..........................................................................................
Prepayments................................................................................................................
Bank balances and cash..............................................................................................

8
9
10
12

14
15

TOTAL ASSETS .......................................................................................................

EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital ...............................................................................................................
Treasury shares ...........................................................................................................
Statutory reserve .........................................................................................................
Retained earnings .......................................................................................................
Cumulative changes in fair value of derivatives .........................................................
Reserve for proposed bonus issue ..............................................................................
Proposed dividend ......................................................................................................

1,000,000
(10,050)
14,544
22,881
3,800
50,000

500,000
(5,050)
7,914
28,371
(6,419)

25,000

Minority interests ........................................................................................................

1,081,175
64,601

549,816
14,530

Total equity .................................................................................................................

1,145,776

564,346

10,604
393,836
308,809

1,194
213,680
324,323

180,075
132,263
7,884

180,075
121,826
5,604

1,033,471

846,702

318,919
111,933
25,416
15,514
14,177

161,211
27,501
26,313
9,396
8,321

485,959

232,742

Total liabilities ............................................................................................................

1,519,430

1,079,444

TOTAL EQUITY AND LIABILITIES .....................................................................

2,665,206

1,643,790

Non-current liabilities
Accounts payable and accruals...................................................................................
Term loans ..................................................................................................................
Islamic Ijara loans ......................................................................................................
Islamic Istisnaa loans.................................................................................................
Islamic Muqawala loans .............................................................................................
Employees end of service benefits..............................................................................

Current liabilities
Accounts payable and accruals...................................................................................
Bank overdrafts ..........................................................................................................
Current portion of term loans ....................................................................................
Current portion of Ijara loans....................................................................................
Current portion of Muqawala loans ..........................................................................

Mohamed Saif Al Mazrouei

CHAIRMAN

17
18
19
26
20
20

24
21
22
8&
22
22
23

24
16
21
22
22

Dany Safi
CHIEF EXECUTIVE OFFICER

The attached notes 1 to 32 form part of these consolidated financial statements.

F-14

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2005
2005
AED 000

2004
AED 000
(Restated)

51,140

31,585

9
12
12
23
4

43,404
12
594
2,280
(9,764)
35,433

36,415
862

2,152
(3,962)
20,401

(5,486)
(84)

(746)

Notes
OPERATING ACTIVITIES
Profit for the year attributable to equity holders of the parent .................................
Adjustment for:
Depreciation................................................................................................................
Amortisation of goodwill and trademarks .................................................................
Provision for impairment losses relating to goodwill .................................................
Provision for employees end of service benefits ........................................................
Interest income ...........................................................................................................
Finance costs ..............................................................................................................
Revaluation gain on financial assets carried at
fair value through income statement ..........................................................................
Profit on sale of property, plant and equipment ........................................................

117,529

86,707

Working capital changes:

Inventories ..................................................................................................................
Accounts receivable and prepayments........................................................................
Contract work in progress ..........................................................................................
Accounts payable and accruals...................................................................................

(9,233)
(66,484)
1,246
167,118

(3,613)
(76,725)
(41,022)
(21,686)

Net cash from (used in) operations ............................................................................

Minority interests........................................................................................................
Finance costs ..............................................................................................................

210,176
50,071
(35,433)

(56,339)
6,543
(20,401)

Net cash from (used in) operating activities...............................................................

224,814

(70,197)

(26,088)
193
(8,898)
(27,483)
(70,783)
(577,465)

9,764

(5,701)
76,565

(13,541)

(219,813)
(25,103)
3,962

(700,760)

(183,631)

500,000
(5,000)
(25,000)
208,081
(28,822)

(9,396)
18,757
(2,464)

(5,050)
(15,000)
250,040
(194,966)
187,425
(94,706)
86,228
(2,465)
180,075

656,156

391,581

INVESTING ACTIVITIES
Purchase of property, plant and equipment ...............................................................
Proceeds from sale of property, plant and equipment ...............................................
Additional goodwill arising on acquisition of subsidiary...........................................
Investments in associates ............................................................................................
Purchase of financial assets carried at fair value through income statement.............
Additions to capital work in progress ........................................................................
Acquisition of subsidiaries, net of cash acquired .......................................................
Interest received ..........................................................................................................

9
12

Net cash used in investing activities ...........................................................................

FINANCING ACTIVITIES
Share capital received .................................................................................................
Contribution to Treasury shares ................................................................................
Dividends paid ............................................................................................................
Term loans received ....................................................................................................
Term loans repaid.......................................................................................................
Islamic Ijara loans received ........................................................................................
Islamic Ijara loans repaid ...........................................................................................
Muqawala loans received............................................................................................
Muqawala loans repaid ..............................................................................................
Islamic Istisnaa loans received...................................................................................

17
18

Net cash from financing activities ..............................................................................

INCREASE IN CASH AND CASH EQUIVALENTS ............................................
Cash and cash equivalents at 1 January.....................................................................

16

180,210
227,889

137,753
90,136

CASH AND CASH EQUIVALENTS AT 31 DECEMBER .....................................

16

408,099

227,889

Significant non-cash transactions, which have been excluded from the statement of
cash flows, are as follows:
Accounts payable and accruals fair value adjustment for derivatives ....................
Accounts receivable and prepayments fair value adjustment for derivatives..........
Transfer from capital work in progress to property, plant and equipment ...............
Transfer from property, plant and equipment to assets held for sale........................

The attached notes 1 to 32 form part of these consolidated financial statements.

F-15

10,219
266,506
17,867

1,248
(3,352)
17,025

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2005
Attributable to equity holders of the parent

Balance at 1 January 2004 (as previously stated) ......

Effect of adopting IFRS 2 (note 18)..........................
Reclassification from advance to employee
incentive scheme (note 18)..........................................

Share
capital
AED 000
500,000

Treasury
shares
AED 000

Statutory
reserve
AED 000
5,160

Retained
earnings
AED 000
25,838
(1,298)

Cumulative
changes in Reserve for
proposed
fair value of
derivatives bonus issue
AED 000
AED 000
(4,315)

Total
AED 000
541,683
(1,298)

Minority
interests Total equity
AED 000
AED 000
7,986
549,669

(1,298)

(5,050)

(5,050)

(5,050)

At 1 January 2004 (restated) ......................................

Net movement in fair value of cash flow hedges .......

500,000

(5,050)

5,160

24,540

(4,315)
(2,104)

15,000

535,335
(2,104)

7,986

543,321
(2,104)

Total expense for the year

recognised directly in equity.......................................
Profit for the year.......................................................

31,585

(2,104)

(2,104)
31,585

3,908

(2,104)
35,493

Total income and expense for the year ......................

Increase in share capital of subsidiaries .....................
Transfer to statutory reserve ......................................
Purchase of minority interests during the year ..........
Dividend paid .............................................................
Dividend proposed .....................................................

2,754

31,585

(2,754)

(25,000)

(2,104)

(15,000)
25,000

29,481

(15,000)

3,908
4,877

(1,041)
(1,200)

33,389
4,877

(1,041)
(16,200)

Balance at 31 December 2004 (restated) ....................

500,000

7,914

28,371

(6,419)

25,000

549,816

14,530

564,346

Net movement in fair value of cash flow hedges .......

10,219

10,219

10,219

Total income for the year

recognised directly in equity.......................................
Profit for the year.......................................................

51,140

10,219

10,219
51,140

16,507

10,219
67,647

Total income and expense for the year ......................

Increase in share capital .............................................
Transfer to statutory reserve ......................................
Dividend paid .............................................................
Contribution to treasury shares .................................
Proposed bonus issue .................................................

500,000

(5,000)

6,630

51,140

(6,630)

(50,000)

10,219

50,000

61,359
500,000

(25,000)
(5,000)

16,507
36,264

(2,700)

77,866
536,264

(27,700)
(5,000)

Balance at 31 December 2005 .....................................

1,000,000

(10,050)

14,544

22,881

3,800

50,000

(5,050)

Proposed
dividend
AED 000
15,000

(25,000)

The attached notes 1 to 32 form part of these consolidated financial statements.

F-16

1,081,175

64,601

1,145,776

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2005
1
ACTIVITIES
National Central Cooling Company PJSC is registered in the United Arab Emirates as a Public Joint
Stock Company pursuant to the U.A.E. Commercial Companies Law No. 8 of 1984 (as amended).
The principal objectives of the Company are to construct, own, assemble, install, operate and
maintain cooling and conditioning systems. In addition, the Companys objectives include to distribute
and sell chilled water for use in district cooling technologies.
The Companys registered office is located at P O Box 32444, Dubai, United Arab Emirates.
The consolidated financial statements were authorised for issue in accordance with a resolution of the
Board of Directors on 12 February 2006.
2.1 BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards and applicable requirements of the UAE Commercial Companies Law of 1984
(as amended).
The consolidated financial statements have been presented in United Arab Emirates Dirhams (AED)
which is the functional currency of the Company. All values are rounded to the nearest thousand
(AED 000) except when otherwise indicated.
The consolidated financial statements are prepared under the historical cost convention modified to
include the measurement at fair value of derivative financial instruments, share-based payments and
financial assets carried at fair value through income statement.
2.2 CHANGES IN ACCOUNTING POLICIES
The accounting policies are consistent with those used in the previous year except that the Company
has adopted those new / revised standards mandatory for financial years beginning on or after 1
January 2005.
The changes in accounting policies result from adoption of the following new or revised standards:
*

IFRS 2 Share-based payment

IFRS 3 Business Combinations and IAS 36 (revised) Impairment of Assets

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

The principal effects of these changes in policies are discussed below:

*

IFRS 2 Share-based Payment

The accounting policy for share based payment transactions is described in the summary of
significant accounting policies. The main impact of IFRS 2 on the Company is the recognition of an
expense and a corresponding entry to liability for cash settled notional units of Companys ordinary
shares granted to qualifying employees of the Company. The liability is remeasured at each balance
sheet date up to and including the settlement date with changes in fair value recognised in the income
statement.
The Company has applied IFRS 2 retrospectively and the effect of the policy has decreased
consolidated current year profits by AED 1.8 million and retained earnings at 1 January 2004 by
AED 1.3 million. A liability of AED 7.2 million representing the fair value of the outstanding cash
settled notional units of Companys ordinary shares granted as at 31 December 2005 is carried in the
balance sheet (refer to note 18).
*

IFRS 3 Business Combinations and IAS 36 (revised) Impairment of Assets

IFRS 3 has been applied for business combinations for which the agreement date is on or after 31
March 2004. Additionally, the adoption of IFRS 3 and IAS 36 (revised) has resulted in the Company
ceasing annual goodwill amortisation and commencing testing for impairment at the cash generating
unit level annually from 1 January 2005. The transitional provisions of IFRS 3 have required the
Company to eliminate at 1 January 2005 the carrying amount of the accumulated amortisation by
AED 8.6 million with a corresponding entry to goodwill.
F-17

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
2.2
*

CHANGES IN ACCOUNTING POLICIES continued

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IFRS 5 requires a component of an entity to be classified as discontinued when the criteria to be

classified as held for sale have been met or it has been disposed of. An item is classified as held for
sale if its carrying amount will be recovered principally through a sale transaction rather than
through continuing use. Such a component represents a separate major line of business or
geographical area of operations, is part of a single co-ordinated major line of business or
geographical area of operations or is a subsidiary acquired exclusively with a view to resale.
The effect of the policy has resulted in the reclassification of the net carrying amount of AED 17.9
million representing a district cooling plant from non-current assets to the heading of assets classified
as held for sale under current assets. The Company has committed to a third party for the sale of
the plant at a value expected by the management to be in excess of its carrying amount at 31
December 2005.
2.3 SIGNIFICANT ACCOUNTING ESTIMATES
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet 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 discussed below:
Impairment of goodwill
The Company determines whether goodwill is impaired at least on an annual basis. This requires an
estimation of the value in use of the cash generating units to which the goodwill is allocated.
Estimating the value in use requires the Company to make an estimate of the expected future cash
flows from the cash generating unit and also to choose a suitable discount rate in order to calculate
the present value of those cash flows. The carrying amount of goodwill at 31 December 2005 was
AED 38 million (2004: AED 30 million). More details are given in note 12.
Impairment of accounts receivable
An estimate of the collectible amount of trade accounts receivable is made when collection of the full
amount is no longer probable. For individually significant amounts, this estimation is performed on
an individual basis. Amounts which are not individually significant, but which are past due, are
assessed collectively and a provision applied according to the length of time past due, based on
historical recovery rates.
At the balance sheet date, gross trade accounts receivable were AED 168.4 million (2004: AED 114.5
million), and the provision for doubtful debts was AED 7.8 million (2004: AED 6 million). Any
difference between the amounts actually collected in future periods and the amounts expected will be
recognised in the income statement.
2.4

SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and each
of its controlled subsidiaries as at 31 December each year. The financial statements of subsidiaries are
prepared for the same reporting year as the parent company, using consistent accounting policies.
Where subsidiary financial statements are drawn up to different reporting dates, adjustments are
made. All significant inter-company balances, transactions and profits have been eliminated on
consolidation.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company
obtains control, and continue to be consolidated until the date that such control ceases.
Minority interest principally represents the interest in subsidiaries not held by the Company and are
presented separately in the income statement and within equity in the consolidated balance sheet,
separately from parent shareholders equity.
F-18

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
2.4

SIGNIFICANT ACCOUNTING POLICIES continued

Revenue recognition
Sales are recognised when the significant risks and rewards of ownership of the goods and services
have passed to the buyer and the amount of revenue can be measured reliably. For sale of chilled
water, revenue comprises of available capacity and variable output provided to customers and is
recognised when services are provided.
Contract revenue represents the total sales value of work performed during the year, including the
estimated sales value of contracts in progress assessed on a percentage of completion method,
measured by reference to total cost incurred to date to estimated total cost of the contract. Provision
is made for any known losses and contingencies.
Interest revenue is recognised as the interest accrues (using the effective interest method that is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial
instruments to the net carrying amount of the financial asset).
Capital work in progress
Capital work in progress is recorded at cost which represents the contractual obligations of the
Company for the construction of the plant. Allocated costs directly attributable to the construction of
the asset are capitalised. The capital work in progress is transferred to the appropriate asset category
and depreciated in accordance with the Companys policies when construction of the asset is
completed and commissioned.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in
value. Land is not depreciated. Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets as follows:
Plant and buildings
Furniture and fixtures
Office equipment and instruments
Motor vehicles

over
over
over
over

25 years
3 to 4 years
3 to 4 years
4 to 5 years

The carrying values of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate the carrying value may not be recoverable. If any such indication
exists and where carrying values exceed the estimated recoverable amount, the assets are written down
to their recoverable amounts.
Expenditure incurred to replace a component of an item of property, plant and equipment that is
accounted for separately is capitalised and the carrying amount of the component that is replaced is
written off. Other subsequent expenditure is capitalised only when it increases future economic
benefits of the related item of property, plant and equipment. All other expenditure is recognised in
the income statement as the expense is incurred.
The Company performs regular major overhaul of its district cooling plants. When each major
overhaul is performed, its cost is recognised in the carrying amount of the item of property, plant
and equipment as a replacement if the recognition criteria are satisfied. The cost recognised is
depreciated over the period till the next planned major overhaul.
Investments in associates
The Companys investments in associates are accounted for under the equity method of accounting.
These are entities in which the Company has between 20% to 50% of the voting power or over which
it exercises significant influence and which is neither a subsidiary nor a joint venture. Investments in
associates are carried in the balance sheet at cost, plus post-acquisition changes in the Companys
share of net assets of the associate, less any impairment in value. The income statement reflects the
Companys share of the results of its associates.
F-19

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
2.4 SIGNIFICANT ACCOUNTING POLICIES continued
The reporting dates of the associates and the Company are identical and the associates accounting
policies conform to those used by the Company for like transactions and events in similar
circumstances.
Interest in joint venture
The Companys interest in its joint venture is accounted for by proportionate consolidation, which
involves recognising a proportionate share of the joint ventures assets, liabilities, income and expenses
with similar items in the consolidated financial statements on a line-by-line basis.
Intangibles
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost
of the business combination over the Companys interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more
frequently if events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Companys cash-generating units, or groups of cashgenerating units, that are expected to benefit from the synergies of the combination, irrespective of
whether other assets or liabilities of the Company are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is so allocated:
*

represents the lowest level within the Company at which the goodwill is monitored for internal
management purposes; and

is not larger than a segment based on either the Companys primary or secondary reporting
format determined in accordance with IAS 14 Segment Reporting.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of
cash-generating units), to which the goodwill relates. Where the recoverable amount of the cashgenerating unit (group of cash-generating units) is less than the carrying amount, an impairment loss
is recognised. Where goodwill forms part of a cash-generating unit (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 retained.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of an asset are
capitalised (net of interest income on temporary investment of borrowings) as part of the cost of the
asset until the asset is commissioned for use. Borrowing costs in respect of completed assets or not
attributable to assets are expensed in the period in which they are incurred.
Contract work in progress
Contract work in progress represents cost plus attributable profit less provision for foreseeable losses
and progress payments received and receivable.
Impairment and uncollectibility of financial assets
An assessment is made at each balance sheet date to determine whether there is objective evidence
that a specific financial asset may be impaired. If such evidence exists, any impairment loss is
recognised in the income statement. For assets carried at cost, impairment is the difference between
cost and the present value of future cash flows discounted at the current market rate of return for a
similar financial asset.

F-20

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
2.4

SIGNIFICANT ACCOUNTING POLICIES continued

Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are those expenses incurred
in bringing each product to its present location and condition, as follows:
*

Raw materials, consumables and goods for

resale
Work in progress and finished goods

purchase cost on a first-in, first-out basis.

costs of direct materials and labour plus

attributable overheads based on a normal
level of activity.

Net realisable value is based on estimated selling price less any further costs expected to be incurred
on completion and disposal.
Accounts receivable
Accounts receivable are stated at original invoice amount less a provision for any uncollectible
amounts. An estimate for doubtful debts is made when collection of the full amount is no longer
probable. Bad debts are written off when there is no possibility of recovery.
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash in hand,
bank balances, and short-term deposits with an original maturity of three months or less, net of
outstanding bank overdrafts.
Accounts payable and accruals
Liabilities are recognised for amounts to be paid in the future for goods or services received, whether
billed by the supplier or not.
Provisions
Provisions are recognised when the Company and its subsidiaries have an obligation (legal or
constructive) arising from a past event and the cost to settle the obligation is both probable and able
to be reliably measured.
Term loans and Islamic loans
The term loans and Islamic loans are carried on the balance sheet at their principal amount.
Instalments due within one year are shown as a current liability. Interest on term loans and
fluctuating profit charges on Islamic loans are charged as an expense or capitalised as part of capital
work in progress in accordance with International Accounting Standard No 23 as they accrue, with
unpaid amounts included in accounts payable and accruals.
Financial assets at fair value through income statement
Investments are classified as financial assets at fair value through income statement if the fair value of
the investment can be reliably measured. These are re-measured at fair value with all changes in fair
value being recorded in the income statement.
Leases
Finance leases, which transfer to the Company and its subsidiaries substantially all the risks and
benefits incidental to ownership of the leased item, are capitalised at inception of the lease at the fair
value of the leased asset or, if lower, 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
recognised directly in the income statement.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or
the lease term.
F-21

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
2.4 SIGNIFICANT ACCOUNTING POLICIES continued
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the
leased item are classified as operating leases. Operating lease payments are recognised as an expense
in the income statement on a straight line basis over the lease term.
Employees end of service benefits
The Company and its subsidiaries provide end of service benefits to its expatriate employees. The
entitlement to these benefits is based upon the employees final salary and length of service, subject to
the completion of a minimum service period. The expected costs of these benefits are accrued over the
period of employment.
With respect to its national employees, the Company and its subsidiaries make contributions to the
relevant UAE Government pension scheme calculated as a percentage of the employees salaries. The
obligations under these schemes are limited to these contributions, which are expensed when due.
Derivative financial instruments
The Company uses derivative financial instruments such as interest rate swaps and caps to hedge its
risks associated with interest rate currency fluctuations. Such derivative financial instruments are
stated at fair value. The fair value of interest rate swap and cap contracts is determined by reference
to market values for similar instruments. Derivatives with positive market values (unrealised gains)
are included in other assets and derivatives with negative market values (unrealised losses) are
included in other liabilities in the balance sheet.
For the purposes of hedge accounting, hedges are classified as either fair value hedges where they
hedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedges
where they hedge exposure to variability in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a forecasted transaction.
In relation to fair value hedges which meet the conditions for hedge accounting, any gain or loss
from remeasuring the hedging instrument at fair value is recognised immediately in the income
statement. Any gains or losses on the hedged item attributable to the hedged risk are adjusted against
the carrying amount of the hedged item and recognised in the income statement. Where the
adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment
is amortised to the income statement such that it is fully amortised by maturity.
In relation to cash flow hedges which meet the conditions for hedge accounting, the portion of the
gain or loss on the hedging instrument that is determined to be an effective hedge is recognised
initially in equity and the ineffective portion is recognised in the income statement. The gain or loss
on effective cash flow hedges recognised initially in equity is either transferred to the income
statement in the period in which the underlying transaction impacts the income statement or
capitalised with other borrowing costs directly attributable to the construction of each plant as part
of the capital work in progress. The capitalisation of gain or loss ceases when the asset is
commissioned for use.
For derivatives that do not qualify for special hedge accounting, any gain or loss arising from
changes in fair value is taken to the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or
exercised, or no longer qualifies for special hedge accounting. At that point in time, any cumulative
gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted
transaction occurs.

F-22

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
2.4 SIGNIFICANT ACCOUNTING POLICIES continued
Share-based payment transactions
Qualifying employees (including senior executives) of the Company receive part of their remuneration
in the form of share-based payment transactions. The employees are granted notional units of
Companys ordinary shares which are settleable in cash (cash-settled transactions). The cost of the
cash settled transactions is measured initially at fair value at the grant date based on the unit value
determined by management of the Company. The fair value is expensed to the income statement in
the year of grant with recognition of a corresponding liability. The liability is remeasured at each
balance sheet date up to and including the settlement date with changes in fair value recognised in
the income statement.
Treasury shares
Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or
loss is recognised in the income statement on the purchase, sale, issue or cancellation of the
Companys own equity instruments.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date. All differences are taken to the income statement.
Financial instruments
Financial instruments comprise receivables, deposits, bank balances and cash, payables and certain
other assets and liabilities.
Fair values of financial instruments are based on estimated fair values using methods such as the net
present value of future cash flows.
The fair value of interest bearing items is estimated based on discounted cash flows using interest
rates for items with similar terms and risk characteristics. The fair value of investments traded in
organised markets is determined by reference to quoted market bid prices.
For unquoted equity investments, fair value is determined by reference to the market value of a
similar investment or is based on the expected discounted cash flows.
2.5 IASB INTERPRETATION ISSUED BUT NOT ADOPTED
The following Interpretation has been issued but is not yet mandatory, and has not yet been adopted
by the Company:
IFRIC 4 Determining Whether an Arrangement Contains a Lease
Management is aware of the application of the above interpretation, which will take place during
2006. The Management is in the process of assessing the applicability of the interpretation, if any, to
its operations at the balance sheet date.

F-23

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
3

SEGMENTAL ANALYSIS
Services
AED 000

Chilled water
AED 000

Contracting
AED 000

Manufacturing
AED 000

2005
Revenue
External revenue.................
Inter-segment sales .............

37,838
9,690

133,128

109,317

120,621

(9,690)

400,904

Total revenue......................

47,528

133,128

109,317

120,621

(9,690)

400,904

Result
Segment result ....................

15,647

21,058

21,395

32,163

(2,911)

87,352

(35,433)
15,250

478

478
(16,507)

Finance costs ......................

Interest income ...................
Share of results of
associates.......................
Minority interests ...............

Eliminations
AED 000

Profit for the year...............

Total
AED 000

51,140

2004
Revenue
External revenue.................
Inter-segment sales .............

13,606
1,526

101,494

83,988

42,997

(1,526)

242,085

Total revenue......................

15,132

101,494

83,988

42,997

(1,526)

242,085

Result
Segment result ....................

2,803

23,364

16,499

9,540

(46)

52,160

(20,401)
3,962

(228)

(228)
(3,908)

Finance costs ......................

Interest income ...................
Share of results of
associates.......................
Minority interests ...............
Profit for the year...............

31,585

Services
AED 000

Chilled water
AED 000

Contracting
AED 000

Manufacturing
AED 000

Total
AED 000

2005
Other information
Segment assets................................................
Investments in associates ...............................

57,405

2,304,390
46,002

183,319

74,090

2,619,204
46,002

Total assets.....................................................

57,405

2,350,392

183,319

74,090

2,665,206

Segment liabilities ...........................................

9,627

1,349,683

138,492

21,628

1,519,430

2004
Segment assets................................................
Investments in associates ...............................

17,729

1,429,748
18,519

140,145

37,649

1,625,271
18,519

Total assets.....................................................

17,729

1,448,267

140,145

37,649

1,643,790

Segment liabilities ...........................................

6,233

968,534

90,118

14,559

1,079,444

F-24

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
3

SEGMENTAL ANALYSIS continued

Other information continued

Services
AED 000

Chilled water
AED 000

Contracting
AED 000

Manufacturing
AED 000

Total
AED 000

2005
Capital expenditure:
Tangible fixed assets.......................................

615

22,353

79

3,041

26,088

Depreciation...................................................

358

41,947

216

883

43,404

Amortisation ..................................................

12

12

2004
Capital expenditure:
Tangible fixed assets.......................................

23

3,511

1,765

402

5,701

Depreciation...................................................

160

35,387

868

36,415

Amortisation ..................................................

862

862

The Company is organised as one geographical segment and consequently, no secondary information
is required to be provided.
4

OTHER INCOME

Bank interest......................................................................................................
Investment income .............................................................................................
Miscellaneous income ........................................................................................

2005
AED 000
9,764
5,486
4,784

2004
AED 000
3,962

3,797

20,034

7,759

2005
AED 000
82,696

2004
AED 000
29,884

5
PROFIT FOR THE YEAR
The profit for the year is stated after charging:

Inventories recognised as expense upon sale of finished goods.........................

6
BASIC EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the profit for the year attributable to ordinary
equity holders of the parent by the weighted average number of ordinary shares outstanding during
the year as follows:
Profit for the year (AED 000)...........................................................................

2005
51,140

2004
31,585

Weighted average number of ordinary shares issued (000) ..............................

945,205

814,800

Basic earnings per share (AED 000) ................................................................

0.05

0.04

The weighted average number of ordinary shares in issue used in the determination of the earnings
per share for the year ended 31 December 2004 have been adjusted for the effect of the split of the
nominal value of the Companys ordinary shares from AED 10 to AED 1 per share.
F-25

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
7
RESULTS OF SUBSIDIARIES
Included in the consolidated income statement for the years ended 31 December 2005 and 2004 are
the following in respect of subsidiary operations:

Revenues ............................................................................................................
Expenses.............................................................................................................
Profit for the year before minority interest .......................................................

2005
AED 000
281,360
(215,001)
66,359

2004
AED 000
144,019
(116,578)
27,441

The above balances represent results prior to eliminations for intercompany transactions.
8
CAPITAL WORK IN PROGRESS
The movement in capital work in progress during the year is as follows:
2005
AED 000

2004
AED 000
(Restated)
117,357
205,774
(17,025)

Balance at 1 January .........................................................................................

Additions during the year..................................................................................
Transfer to property, plant and equipment (note 9) .........................................

306,106
555,777
(266,506)

Balance at 31 December ....................................................................................

Advances to contractors ....................................................................................

595,377
47,544

306,106
25,856

642,921

331,962

A substantial portion of capital work in progress has been funded under Islamic financing
arrangements and term loans (notes 21 and 22). Upon completion of the construction of plants under
Istisnaa financing arrangements, the total cost of the plant thereafter is financed under an Islamic
Ijara agreement.
Istisnaa is a sales contract between a contract owner (the Islamic financing institution) and a
contractor (the Company) whereby the contractor, based on an order from the contract owner,
undertakes to manufacture or otherwise acquire the subject matter of the contract according to
specifications, and sells it to the contract owner for an agreed upon price and method of settlement
whether that be in advance, by instalments or deferred to a specific future time.
In addition, AED 178.3 million (2004: AED 220.4 million) is included in capital work in progress
which has been funded under a separate Islamic financing arrangement.
Included in additions to capital work in progress are capitalised financing costs amounting to AED
29.5 million (2004: AED 23.3 million).

F-26

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
9

PROPERTY, PLANT AND EQUIPMENT

Cost:
At 1 January 2005 ...........................
Additions .........................................
Transfer from capital work in
progress (note 8) .........................
Transfer of assets held for sale (note
2.2) ..............................................
Disposals .........................................
At 31 December 2005 ......................
Depreciation:
At 1 January 2005 ...........................
Charge for the year .........................
Transfer of assets held for sale (note
2.2) ..............................................
Disposals .........................................

Land, plant
and
buildings
AED 000

Furniture
and
fixtures
AED 000

Office
equipment
and
instruments
AED 000

Motor
vehicles
AED 000

Total
AED 000

825,495
23,328

5,242
1,369

11,641
1,198

2,031
193

844,409
26,088

264,155

2,351

266,506

(19,748)
(96)

(12)

(125)

(19,748)
(254)

1,093,134

(63,159)
(40,275)
1,881
5

(21)

6,599

15,169

(2,779)
(1,117)

(4,675)
(1,651)

2,099

1,117,001

(902)
(361)

(71,515)
(43,404)

125

1,881
145

At 31 December 2005 ......................

(101,548)

(3,889)

(6,318)

Net carrying amount:

At 31 December 2005.......................

991,586

2,710

8,851

961

1,004,108

At 31 December 2004 ......................

762,336

2,463

6,966

1,129

772,894

Included in operating costs................................................................................

Included in other administrative expenses.........................................................
Included in capital work in progress .................................................................

2005
AED 000
39,401
3,630
373

2004
AED 000
32,981
3,343
91

43,404

36,415

(1,138)

(112,893)

The depreciation charge for the year has been dealt with as follows:

At 31 December 2005, the net book value of plants financed by an Islamic Ijara loan under sale and
leaseback Ijara financing arrangements amounted to AED 563.9 million (2004: AED 407.9 million).
The plants are constructed on land which has been granted to the Company and one of its
subsidiaries at nominal or no cost to them.
Included in land, plant and buildings is an amount of AED 11.1 million relating to freehold land
purchased by the Company in the Emirate of Ajman for the purpose of constructing a district
cooling plant.

F-27

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
10 INVESTMENTS IN ASSOCIATES
The Company has the following investments in associates:

Industrial City Cooling Company ................

Qatar Central Cooling Company PJSC .......
Tabreed District Cooling Company (Saudi).

Country of incorporation
Emirate of Abu Dhabi
State of Qatar
Kingdom of Saudi Arabia

Ownership
2005
2004
20%
20%
44.5%
44.5%
25%

The associates are involved in the same business activity as the Company. The reporting dates for the
associates are identical to the Company.
The following illustrates summarised information of the Companys investments in associates:
2005
AED 000

2004
AED 000

Share of the associates balance sheets:

Current assets ....................................................................................................
Non-current assets .............................................................................................
Current liabilities ...............................................................................................
Non-current liabilities ........................................................................................

38,239
75,446
(21,068)
(46,615)

12,856
18,315
(1,402)
(11,250)

Net assets ...........................................................................................................

46,002

18,519

Share of the associates revenues and results:

Revenues ............................................................................................................

2,791

839

Results ...............................................................................................................

478

Carrying amount of the investments .................................................................

46,002

(228)
18,519

Management believe that the carrying value of the investments will be realised in full.
The Company invested an amount of AED 27.4 million representing its share of additional share
capital issued by the associates during the year as follows:

Qatar Central Cooling Company PJSC...................................................................................

Tabreed District Cooling Company (Saudi)............................................................................

AED 000
26,980
491

Tabreed District Cooling Company (Saudi) was incorporated during the year and recently commenced
operations. Hence, there were no significant operating activities during the year ended 31 December
2005.

F-28

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
11 INTEREST IN JOINT VENTURE
The Companys share of the assets and liabilities of the joint venture, SNC Lavalin Gulf
Contractors, a limited liability company incorporated in the Emirate of Abu Dhabi, included in the
consolidated financial statements are as follows:

Current assets ....................................................................................................

Non-current assets .............................................................................................

Current liabilities ...............................................................................................

Non-current liabilities ........................................................................................

2005
AED 000
140,342
572

2004
AED 000
20,392
2,599

140,914

22,991

125,147
226

17,774
58

125,373

17,832

There are no revenues or expenses of the joint venture for the years ended 31 December 2005 and
2004 included in the consolidated financial statements.
12

INTANGIBLES

Balance at 1 January .....

Additions during the
year ...........................
Provision for
impairment losses .....
Amortisation for the
year ...........................
Balance at 31 December

Goodwill
2005
2004
AED 000
AED 000
30,030
11,059
8,898

Trademarks
2005
2004
AED 000
AED 000
14
75

Total
2005
2004
AED 000
AED 000
30,044
11,134

19,772

(594)

(594)

(801)

(12)

(61)

(12)

(862)

14

38,334

30,030

8,898

38,336

19,772

30,044

13 IMPAIRMENT TESTING OF GOODWILL

Goodwill acquired through business combinations has been allocated to the following individual cashgenerating units, for impairment testing:
*

Ian Banham & Associates cash-generating unit relating to goodwill arising from acquisition of
equity interest in Ian Banham & Associates; and

Tabreed 1 District Cooling Plant relating to goodwill arising from acquisition of Gulf Energy
Systems.

Ian Banham & Associates

The recoverable amount of Ian Banham & Associates unit has been determined based on a value in
use calculation using cash flow projections prepared by an external consultant in the year ended 31
December 2004 and extrapolated by the senior management using a stable growth rate to cover a
five-year period. The discount rate applied to the cash flow projections is 25%.
Tabreed 1 District Cooling Plant
The recoverable amount of Tabreed 1 District Cooling Plant unit is also determined based on a value
in use calculation using cash flow projections. The revenue included in the cash flow projections is
based on a contractual agreement for the sale of chilled water to a customer for a period of 20 years.
The operating costs are determined based on managements approved financial forecast. The discount
rate applied to the cash flow projections is 9.4%.
F-29

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
13 IMPAIRMENT TESTING OF GOODWILL continued
Carrying amount of goodwill allocated to each of the cash generating units is as follows:

Ian Banham & Associates .................................................................................

Tabreed 1 District Cooling Plant ......................................................................

2005
AED 000
27,711
9,712

2004
AED 000
18,811
9,712

Key assumptions used in value in use calculation of Ian Banham & Associates and Tabreed 1 District
Cooling Plant for the years ended 31 December 2005 and 2004:
The following describes each key assumption on which management has based its cash flows
projections to undertake impairment testing of goodwill:
Ian Banham & Associates:
Terminal Value of business is based on the estimate provided by the external consultant in the year
ended 31 December 2004 and updated by the management as at 31 December 2005.
Tabreed 1:
Price Inflation: A general price inflation level of 3% has been applied to the cash flows. The basis used
to determine the value assigned to the price inflation is managements estimate of the long term average
forecast for the United Arab Emirates.
Residual Value: An estimate of 20% of the original cost of the plant is used as an estimate of the
residual value of the plant at the end of the term of the agreement. The useful life of the plant is in
excess of the period of the contractual agreement with the customer.
14

TRADE AND OTHER RECEIVABLES

Trade accounts receivable..................................................................................

Other receivables................................................................................................

15

2005
AED 000
160,617
46,390

2004
AED 000
(Restated)
108,523
17,411

207,007

125,934

CONTRACT WORK IN PROGRESS

Cost plus attributable profit ..............................................................................

Less: progress billings ........................................................................................

2005
AED 000
261,291
(192,080)
69,211

2004
AED 000
158,844
(88,387)
70,457

16 CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the statement of cash flows include the following balance sheet
amounts:
2005
2004
AED 000
AED 000
Bank balances and cash.....................................................................................
520,032
255,390
Bank overdrafts .................................................................................................
(111,933)
(27,501)
408,099

227,889

Bank balances and cash include bank deposits of AED 104.2 million (2004: AED 144.1 million)
placed with commercial banks in the United Arab Emirates. These are denominated in AED with
effective rates in the range of 1.7% to 5.0% (2004: 0.875% to 3.5%).
F-30

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
17

SHARE CAPITAL

Authorised and issued share capital

1,000,000,000 ordinary shares at AED 1 each (31 December 2004: 500,000,000
ordinary shares of 1 each).............................................................................

2005
AED 000

2004
AED 000

1,000,000

500,000

The Companys authorised share capital was increased to 100,000,000 ordinary shares at the ExtraOrdinary General Meeting held in March 2005 by way of a rights issue. The rights issue was fully
subscribed to at 19 April 2005.
Further, at the Extra-Ordinary General meeting held in July 2005, the shareholders approved the split
of the nominal value of the Companys ordinary shares from AED 10 to AED 1. The comparative
figures have been adjusted accordingly.
18

TREASURY SHARES AND SHARE-BASED PAYMENTS

Treasury shares
The Company set up an employee incentive scheme in accordance with the Board of Directors
resolution dated 17 December 2000. The Company subsequently contributed an amount of AED
10.05 million to a shareholder for the purchase of the Companys ordinary shares and to act as a
custodian for such shares analysed as follows:
Balance at 1 January 2004 (as previously reported)................................................................
Amount reclassified from advance to employee incentive scheme ..........................................

AED 000

5,050

Balance at 1 January 2004 and 31 December 2004 (restated).................................................

Contribution during the year...................................................................................................

5,050
5,000

Balance at 31 December 2005 ..................................................................................................

10,050

Previously the balance at 31 December 2004 was shown as an advance to employee incentive scheme
under non-current assets. The Company retains the significant risks and rewards associated with the
Companys ordinary shares held by a custodian. Accordingly, the amount of AED 5.05 million has
been reclassified from advance to employee incentive scheme to treasury shares (shown under equity)
as restatement of the balance at 1 January 2004.
The advance during the year represents the consideration paid by the Company to the custodian in
respect of the rights issue (refer to note 17).
Share based payments
The employee incentive scheme (the scheme) grants notional units of the Companys ordinary shares
to qualifying employees on recommendation of the remuneration committee of the Company. These
notional units of the Companys ordinary shares can be settled in cash in accordance with the terms
of the scheme.
At 31 December 2005, the employee incentive scheme had outstanding notional units of the
Companys ordinary shares analysed as follows:

At 1 January 2005....................................................................................................................
Notional units of the Companys ordinary shares granted during the year ...........................
Exercised during the year ........................................................................................................

No. of
shares
1,254,485
517,990
(568,935)

At 31 December 2005 ..............................................................................................................

1,203,540

F-31

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
18 TREASURY SHARES AND SHARE-BASED PAYMENTS continued
The weighted average fair value of notional units granted during the year was AED 3.6 (2004: AED
1.24).
IFRS 2 became effective from 1 January 2005. The main impact of IFRS 2 on the Company is that
the fair value of cash settled notional units of Companys ordinary shares granted to qualifying
employees during the year is expensed with recognition of a liability (note 2.2). The liability is
remeasured at each balance sheet date up to and including the settlement date with changes in fair
value recognised in the income statement and capital work in progress, as applicable (refer below).
The portion of expense arising from the grant and subsequent remeasurement at each balance sheet is
included in the consolidated financial statements as follows:

Other administrative expenses (included under income statement).........................................

Capital work in progress .........................................................................................................

2005
AED 000
1,815
2,268

The amount capitalised under capital work in progress relates to employees who are directly
attributable to the construction activity of the Companys property, plant and equipment.
The Company has applied IFRS 2 retrospectively and the effect of the policy has been recorded as
restatement of the following prior year balances:
Advance to employee incentive scheme ...................................................................................
Retained earnings at 1 January 2004.......................................................................................
Capital work in progress at 1 January 2004............................................................................
Liability for cash settled notional units of Companys ordinary shares .................................
Other payables .........................................................................................................................

AED 000
(7,366)
(1,298)
1,093
4,158
(9,133)

The amount of AED 9.1 million represents the reversal of the cumulative changes in value of advance
to employee incentive scheme due to movements in the market value of the Companys ordinary
shares. The changes in value were previously recorded under the balance sheet headings of advance
to employee incentive scheme and accounts payable and accruals.
19 STATUTORY RESERVE
As required by the U.A.E. Commercial Companies Law of 1984 (as amended) and the articles of
association of the Company and its subsidiaries, 10% of the profit for the year is transferred to the
statutory reserve. The transfer for the year represents 10% of the profit of the Company before
accounting for the Companys share in the results of its subsidiaries, and the Companys share in the
subsidiaries statutory reserves transferred for the year. 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.
20 PROPOSED BONUS SHARE DIVIDEND
The Board of Directors has proposed a bonus share dividend (2004: cash dividend) amounting to
AED 50 million (2004: AED 25 million). The bonus share dividend will be submitted for approval at
the Annual General Meeting in 2006.

F-32

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
21

TERM LOANS

Term loans .........................................................................................................

Other loan..........................................................................................................

Due in less than one year

Term loans .........................................................................................................
Other loan..........................................................................................................

Due in more than one year

Term loans .........................................................................................................
Other loan..........................................................................................................

2005
AED 000
419,097
155

2004
AED 000
239,705
288

419,252

239,993

25,291
125

26,180
133

25,416

26,313

393,806
30

213,525
155

393,836

213,680

419,252

239,993

The term loans are secured by pledges over plant and capital work in progress and a corporate
guarantee in accordance with the facility agreements and are summarised as follows:
On 24 November 2003, the Company entered into a 12 year, AED 700 million term loan facility
agreement (the new facility) with a syndicate of international and UAE based banks. This facility
agreement is to acquire new central cooling plants, and was used to refinance the term loan
amounting to AED 135 million, which is secured over previously constructed central cooling plants
(Note 9), along with the repayment of the bilateral bridging loan of AED 44 million. As at 31
December 2005, the Company has drawn down an amount of AED 424 million under the new
facility, repayable in 24 semi annual instalments commencing 1 October 2004 in accordance with an
agreed upon schedule.
On 26 April 2005, one of the subsidiaries of the Company entered into an 11.5 year, US $20.8
million (AED: 76.4 million) term loan facility agreement with Sumitomo Mitsui Banking Corporation.
This facility agreement is to construct a new central cooling plant. As at 31 December 2005 the
Company has drawn an amount of AED 32.6 million under the facility, repayable in 20 semi annual
instalments commencing 24 months after the date of agreement, in accordance with an agreed upon
schedule.
As the term loans attract interest at rates which vary with market movements, the fair value of the
term loans approximates their carrying value.
At 31 December 2005, unutilised term loan facilities available to the Company amounted to AED
319.8 million (2004: AED 450 million).

F-33

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
22

ISLAMIC FINANCING ARRANGEMENTS

Ijara loans ..........................................................................................................

Istisnaa loans ....................................................................................................
Muqawala loans.................................................................................................

Due in more than one year:

Ijara loans ..........................................................................................................
Istisnaa loans ....................................................................................................
Muqawala loans.................................................................................................

Due in less than one year:

Ijara loans ..........................................................................................................
Muqawala loans.................................................................................................

2005
AED 000
324,323
180,075
146,440

2004
AED 000
333,719
180,075
130,147

650,838

643,941

308,809
180,075
132,263

324,323
180,075
121,826

621,147

626,224

15,514
14,177

9,396
8,321

29,691

17,717

650,838

643,941

Ijara and Istisnaa loans:

The Islamic Ijara and Istisnaa loans consist of a number of facilities, which are secured by an
assignation of the plant purchased under the Islamic financing arrangement and a joint credit and
Islamic loan facility agreement.
Facility 1
The first facility of AED 150 million is repayable in 16 fixed semi-annual instalments commencing
from 18 March 2004 and a fluctuating profit charge is paid under the Islamic financing agreements,
which is based on EIBOR plus a margin. The amount outstanding at 31 December 2005 is AED
136.9 million (2004: AED 146.3 million).
Facility 2 (Sukuk Financing)
On 2 March 2004, the Company entered into Purchase and Ijara Agreements (the Agreement) with
Tabreed Financing Corporation for the sale and leaseback of certain assets of the Company as
specified in the Agreement with a total cost of US $51 million (AED 187.4 million).
Furthermore, the Company entered into an Istisnaa Agreement dated 2 March 2004 with Tabreed
Financing Corporation for the manufacture and commission of certain assets as specified in the
Istisnaa Agreement amounting to US $49 million (AED 180 million). On completion, the specified
assets will be sold and leased back from Tabreed Financing Corporation under similar arrangements
as specified in the existing Ijara Agreement above.
In March 2009, the Company will purchase the assets leased back under the Ijara Agreement from
Tabreed Financing Corporation for an amount of US $100 million, which is the full repayment of the
Ijara and Istisnaa loans referred to above.
The Ijara Agreement carries 10 semi-annual rental payments of AED 5.1 million commencing 2
September 2004. In respect of the Istisnaa assets, the Company is obligated to make 10 semi-annual
pre-rental payments of AED 4.9 million commencing 2 September 2004.

F-34

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
22 ISLAMIC FINANCING ARRANGEMENTS continued
Muqawala loans:
The Company has entered into two Islamic Muqawala loan arrangements as follows:
*

The first Muqawala loan amounting to AED 26.4 million (31 December 2004: AED 28.9
million) is in respect of the procurement and manufacturing of certain items for use in the
construction of plants under an Islamic loan facility agreement dated 31 July 2002. The facility
is repayable in 14 semi-annual instalments commencing from 29 January 2003. A fluctuating
profit charge is paid under the Islamic financing agreement which is based on market rates.

The second Muqawala loan amounting to AED 120 million (31 December 2004: AED 101.2
million) is in respect of the construction of a project under an Islamic loan facility dated 25
March 2003. The facility is repayable in 16 semi-annual rental instalments commencing on 1
May 2006. A variable element is payable with each instalment which is based on market rates
plus a mark up.

At 31 December 2005, unutilised Islamic funding available to the Company amounted to nil (31
December 2004: AED 18.7 million).
23 EMPLOYEES END OF SERVICE BENEFITS
The Company and its subsidiaries provide for employees end of service benefits in accordance with
the employees contracts of employment. The movements in the provision recognised in the balance
sheet are as follows:

Balance at 1 January .........................................................................................

Net movement during the year..........................................................................

2005
AED 000
5,604
2,280

2004
AED 000
3,452
2,152

Balance at 31 December ....................................................................................

7,884

5,604

An actuarial valuation has not been performed as the net impact of discount rates and future
increases in benefits is not likely to be material.
24

ACCOUNTS PAYABLE AND ACCRUALS

2005
AED 000

2004
AED 000
(Restated)

Amounts due in more than one year

Retentions payable.............................................................................................

10,604

1,194

Amounts due in less than one year

Accounts payable...............................................................................................
Retentions payable.............................................................................................
Negative fair value of derivatives ......................................................................
Other payables ...................................................................................................
Payable to former shareholders .........................................................................
Due to related parties ........................................................................................
Accrued expenses ...............................................................................................

153,339
20,790

48,159
6,906
5,076
84,649

70,545
17,798
1,248
47,349
13,006
1,693
9,572

318,919

161,211

F-35

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
25 RELATED PARTY TRANSACTIONS
Related parties represent associated companies, major shareholders, directors and key management
personnel of the Company, and companies of which they are principal owners. Pricing policies and
terms of these transactions are approved by the Companys management.
Transactions with related parties included in the income statement are as follows:
2005

Associated companies......................
Other related parties........................

2004

Income
AED 000
840

Expenses
AED 000

18,330

Fees for
management
services
AED 000
2,447

840

18,330

2,447

Expenses
AED 000

9,439

Fees for
management
services
AED 000
1,252

9,439

1,252

Balances with related parties included in the balance sheet are as follows:
2005
Trade
Accounts
receivables
payable
AED 000
AED 000
5,456

4,853
5,076

Associated companies............................................
Other related parties..............................................

10,309

2004
Trade
Accounts
receivables
payable
AED 000
AED 000
1,794

1,693

5,076

1,794

1,693

2005
AED 000
20,815
1,495

2004
AED 000
11,968
1,369

22,310

13,337

49

39

Compensation of key management personnel

The remuneration of key management personnel during the year was as follows:

Short-term benefits.............................................................................................
Employees end of service benefits.....................................................................

Number of key management personnel.............................................................

26

DERIVATIVE FINANCIAL INSTRUMENTS

The movement in fair value of cash flow hedges was as follows:

Fair value included in equity at 1 January........................................................

Movement in fair value of cash flow hedges .....................................................
Fair value included in equity at 31 December ..................................................

F-36

2005
AED 000
(6,419)
10,219
3,800

2004
AED 000
(4,315)
(2,104)
(6,419)

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
27 CONTINGENCIES
The Company and its subsidiaries bankers have issued guarantees on their behalf as follows:
2005
AED 000
Performance guarantees.....................................................................................
Advance payment guarantees ............................................................................
Letter of credit...................................................................................................
Retention release guarantees .............................................................................
Financial guarantees ..........................................................................................

22,728
70
40,699

3,617

2004
AED 000
(Restated)
18,756
1,525
10,785
4,507
13,204

67,114

48,777

28 CAPITAL COMMITMENTS
The Board of Directors have authorised future capital expenditure amounting to AED 1,393 million
(2004: AED 1,179.3 million). Included in this amount is AED 1,255 million (2004: AED 778.8
million) which is expected to be incurred within one year from the balance sheet date.
29

SUBSIDIARIES

Gulf Energy Systems LLC.................................................................................

National Central Cooling Company Ras Al Khaimah LLC ............................
Emirates Preinsulated Pipes Industries LLC .....................................................
Installation Integrity 2000 LLC.........................................................................
BAC Balticare Gulf LLC ..................................................................................
Summit District Cooling Company ...................................................................
Bahrain District Cooling Company...................................................................
Ian Banham and Associates ..............................................................................
Tabreed Holdings WLL.....................................................................................
Tabreed LLC Oman ..........................................................................................

Country of
incorporation
U.A.E.
U.A.E.
U.A.E.
U.A.E.
U.A.E.
U.A.E.
Bahrain
U.A.E.
Bahrain
Oman

Percentage
of holding
100
100
60
60
100
51
55
70
100
100

Gulf Energy Systems LLC was registered on 15 April 1995 and commenced its commercial activities
thereafter.
National Central Cooling Company Ras Al Khaimah LLC was registered on 22 November 1999 and
commenced its commercial activities thereafter. Effective 1 July 2004, the Company became a wholly
owned subsidiary. Prior to that date it was a 60% owned subsidiary.
Emirates Preinsulated Pipes Industries LLC was registered on 13 December 2000 and commenced its
commercial activities in May 2002.
Installation Integrity 2000 LLC, which was acquired in 2002, was registered on 15 May 2000 and
commenced its commercial activities thereafter.
BAC Balticare Gulf LLC was registered on 7 April 2003 and commenced its commercial activities
thereafter.
The Company acquired a 51% interest in Summit District Cooling Company (SDCC) on 29 May
2004. SDCC commenced its commercial activities thereafter. During the year, the Company invested
an additional amount of AED 7.6 million representing its share of the additional share capital issued
by the Company.
The Company acquired a 55% interest in Bahrain District Cooling Company (BDCC) on 31 October
2004. BDCC commenced its commercial activities thereafter. During the year, the Company invested
an additional amount of AED 25.6 million representing its share of the additional share capital issued
by the Company.
F-37

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
29 SUBSIDIARIES continued
The Company acquired a 70% interest in Ian Banham and Associates on 27 October 2004. Ian
Banham and Associates is already engaged in commercial activities.
Tabreed Holdings WLL was incorporated in the Kingdom of Bahrain registered as a limited liability
company. The Company has a 100% equity interest in Tabreed Holdings WLL. Tabreed Holdings
WLL has recently commenced commercial activities.
Tabreed LLC Oman was incorporated in the Sultanate of Oman registered as a limited liability
company. The Company has a 100% equity interest in Tabreed LLC Oman. Tabreed LLC Oman has
not started commercial activities as at 31 December 2005.
30

RISK MANAGEMENT

Interest rate risk

The Company and its subsidiaries are exposed to interest rate risk on their interest bearing assets and
liabilities (bank overdrafts and loans). Whilst current interest rates and fluctuating profit on Islamic
loans (rates) are low, management has sought to limit the exposure of the Company and its
subsidiaries to any adverse future movements in rates by entering into various interest rate swap and
cap deals during the year. The notional amount outstanding at 31 December 2005 was AED 1,062
million (2004: AED 1,080 million). Included in this amount is AED 601 million (2004: AED 619
million) relating to instruments which have effective dates after 31 December 2005. The derivative
financial instruments entered into for the purposes of a cash flow hedge had positive (2004: negative)
changes in their values amounting to AED 3.8 million (2004: Unrealised losses of AED 6.4 million)
which have been recognised within equity under cumulative changes in fair values of derivatives.
Management is therefore of the opinion that the Company and its subsidiaries exposure to interest
rate risk is limited.
Credit risk
The Company and its subsidiaries seek to limit their credit risk with respect to customers by
monitoring outstanding receivables. The Company and its subsidiaries sell their services and products
to a number of institutions in the UAE. Their three largest customers account for approximately 69%
of outstanding accounts receivable at 31 December 2005 (2004: 3 customers 63%). As amounts
receivable are stated net of any required provision and are short term in nature, fair value
approximates carrying value. The Company limits its credit risk with regard to bank deposits by only
dealing with reputable banks. Credit risk is limited to the carrying values of financial assets in the
balance sheet.
Liquidity risk
The Company and its subsidiaries limit their liquidity risk by monitoring their current financial
position in conjunction with their cash flow forecasts on a regular basis to ensure funds are available
to meet their commitments for liabilities as they fall due. The Company and the subsidiaries terms of
sale require amounts to be paid within 60 to 90 days of the date of sale. Trade payables are normally
settled within 60 days of the date of purchase.
Currency risk
The management considers that the Company and its subsidiaries are not exposed to significant
currency risk. The majority of their transactions and balances are in either UAE Dirhams or US
Dollars. As the UAE Dirham is pegged to the US Dollar, balances in US Dollars are not considered
to represent significant currency risk.
31 FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial assets consist of cash and bank balances and receivables. Financial liabilities consist of bank
overdrafts, term loans, payables, and accrued expenses. Derivatives consist of interest rate swap and
cap deals.
F-38

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2005
31 FAIR VALUES OF FINANCIAL INSTRUMENTS continued
The fair values of the financial assets and liabilities of the Company and its subsidiaries, are not
materially different from their carrying values at the balance sheet date except for certain Islamic
financing arrangements (facility 2 Sukuk financing) as more detailed in note 22.
32 COMPARATIVE INFORMATION
Refer to note 18 for the balances which have been restated in light of changes in International
Financial Reporting Standards and to improve the quality of information presented.

F-39

National Central Cooling Company PJSC

CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2004

F-40

NATIONAL CENTRAL COOLING COMPANY (PJSC)

ERNST &YOUNG

P.O. Box 136

11th Floor
Al Ghaith Tower
Hamdan Street
Abu Dhabi
United Arab Emirates

Phone: 6277522
Fax:
6273383
www.ey.com/me

AUDITORS REPORT TO THE SHAREHOLDERS OF

NATIONAL CENTRAL COOLING COMPANY PJSC
We have audited the accompanying consolidated balance sheet of National Central Cooling Company
PJSC (the Company) and its subsidiaries as of 31 December 2004, and the related consolidated
statements of income, cash flows and changes in equity for the year then ended. These consolidated
financial statements are the responsibility of the Companys management. Our 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 plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company and its subsidiaries as of 31 December 2004 and the results of
their operations and their cash flows for the year then ended in accordance with International
Financial Reporting Standards.
We also confirm that in our opinion 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 in agreement with the books of account. 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 U.A.E. Commercial Companies Law of 1984 (as
amended) or 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
Bassam E Hage
Partner
Registration No. 258
14 February 2005
Abu Dhabi

F-41

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2004
2004
AED
242,084,700
(150,788,183)

2003
AED
190,975,051
(128,544,291)

91,296,517

62,430,760

12

(21,752,516)
(20,319,053)
(861,509)

(18,396,990)
(13,024,641)
(776,103)

(42,933,078)

(32,197,734)
30,233,026
(7,340,599)
2,090,671

Notes
Revenues ..........................................................................................
3
Operating costs.................................................................................
3
GROSS PROFIT.............................................................................
Salaries and staff related costs .........................................................
Other administrative expenses..........................................................
Amortisation of goodwill and trademarks.......................................

PROFIT FROM OPERATIONS....................................................

Finance costs....................................................................................
Other income....................................................................................
Share of results of associates ...........................................................

4
9

48,363,439
(20,400,967)
7,758,466
(227,711)

PROFIT BEFORE MINORITY INTERESTS...............................

Minority interests .............................................................................

19

35,493,227
(3,908,200)

24,983,098
(1,609,777)

31,585,027

23,373,321

0.63

0.47

NET PROFIT FOR THE YEAR ....................................................

Basic earnings per share...................................................................

The attached notes 1 to 29 form part of these consolidated financial statements.

F-42

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED BALANCE SHEET
At 31 December 2004
2004
AED

2003
AED

330,869,051
772,893,901
18,518,900
12,416,431
30,044,298
21,987,485

129,174,890
862,402,237
4,978,051
5,673,662
11,133,400
11,550,000

1,186,730,066

1,024,912,240

8,417,912
131,325,255
70,457,460
8,183,753
255,389,978

4,804,823
67,844,920
29,434,991
5,209,078
110,600,318

473,774,358

217,894,130

1,660,504,424

1,242,806,370

Notes
ASSETS
Non-current assets
Capital work in progress..........................................................................................
Plant, furniture and equipment................................................................................
Investments in associates..........................................................................................
Advance to employee incentive scheme ...................................................................
Intangibles ................................................................................................................
Prepayments .............................................................................................................

Current assets
Inventories................................................................................................................
Trade and other receivables .....................................................................................
Contract work in progress .......................................................................................
Prepayments .............................................................................................................
Bank balances and cash ...........................................................................................

7
8
9
11
12

13
14
15

TOTAL ASSETS .....................................................................................................

EQUITY AND LIABILITIES
Equity
Share capital.............................................................................................................
Statutory reserve ......................................................................................................
Retained earnings.....................................................................................................
Proposed dividend....................................................................................................
Cumulative changes in fair value of derivatives ......................................................

16
17

500,000,000
7,914,371
29,669,010
25,000,000
(6,419,667)

500,000,000
5,160,205
25,838,149
15,000,000
(4,315,300)

556,163,714

541,683,054

19

14,529,845

7,986,372

23
20
21
21
21
22

1,194,280
213,680,402
324,322,983
180,075,029
121,826,103
5,603,590

44,755,852
169,239,594
241,000,000

42,195,906
3,451,744

846,702,387

500,643,096

171,578,635
27,500,632
26,312,840
9,395,644
8,320,727

152,162,162
20,464,466
15,680,000

4,187,220

243,108,478

192,493,848

1,660,504,424

1,242,806,370

18
29

Total equity
MINORITY INTERESTS
Non-current liabilities
Accounts payable and accruals ................................................................................
Term loans ...............................................................................................................
Islamic Ijara loans ...................................................................................................
Islamic Istisnaa loans .............................................................................................. 7 &

Islamic Muqawala loans ......................................................................

Employees end of service benefits ...........................................................................

Current liabilities
Accounts payable and accruals ................................................................................
Bank overdrafts........................................................................................................
Current portion of term loans .................................................................................
Current portion of Ijara loans .................................................................................

Current portion of Muqawala loans ...................................................

TOTAL EQUITY AND LIABILITIES...................................................................

Mohamed Saif Al Mazrouei

CHAIRMAN

23
15
20
21
21

Dany Safi
CHIEF EXECUTIVE OFFICER

The attached notes 1 to 29 form part of these consolidated financial statements.

F-43

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2004
Notes

2004
AED

2003
AED

OPERATING ACTIVITIES
Net profit for the year..............................................................................................
Adjustment for:
Depreciation .........................................................................................................
Amortisation of goodwill and trademarks ...........................................................
Provision for employees end of service benefits ..................................................
Interest income .....................................................................................................
Finance costs ........................................................................................................
Employee incentive scheme award .......................................................................
Profit on sale of plant, furniture and equipment .................................................

31,585,027

23,373,321

36,415,484
861,509
2,151,846
(3,961,583)
20,400,967
821,680
(745,591)

23,282,593
776,103
1,383,136
(1,209,008)
7,340,599

(210,060)

Operating profit before working capital changes.....................................................

Inventories ............................................................................................................
Receivables and prepayments...............................................................................
Contract work in progress....................................................................................
Accounts payable and accruals ............................................................................

87,529,339
(3,613,089)
(88,378,759)
(41,022,469)
(16,711,309)

54,736,684
(898,842)
(44,445,511)
(13,930,041)
81,355,320

Net cash (used in) from operations .........................................................................

Minority interest ......................................................................................................
Finance costs ............................................................................................................

(62,196,287)
6,543,473
(20,400,967)

76,817,610
1,769,777
(7,340,599)

Net cash (used in) from operating activities ............................................................

(76,053,781)

71,246,788

INVESTING ACTIVITIES
Purchase of plant, furniture and equipment ............................................................
Proceeds from sale of plant, furniture and equipment ............................................
Investments in associates..........................................................................................
Advance to the employee incentive scheme .............................................................
Additions to capital work in progress .....................................................................
Acquisition of subsidiaries, net of cash acquired.....................................................
Interest received .......................................................................................................

(5,701,416)
76,565,205
(13,540,849)
(285,430)
(218,719,507)
(25,103,319)
3,961,583

(4,459,558)
537,500
(4,978,051)
(14,456)
(267,111,819)
(220,000)
1,209,008

Net cash used in investing activities.........................................................................

(182,823,733)

(275,037,376)

FINANCING ACTIVITIES
Share capital received...............................................................................................
Dividends paid .........................................................................................................
Term loans received .................................................................................................
Term loans repaid ....................................................................................................
Islamic Ijara loans received......................................................................................
Islamic Ijara loans repaid.........................................................................................
Muqawala loans received .........................................................................................
Muqawala loans repaid............................................................................................
Islamic Istisnaa loans received ................................................................................

(15,000,000)
250,039,996
(194,966,348)
187,425,030
(94,706,403)
86,228,242
(2,464,538)
180,075,029

71,176,740

45,415,907
(86,060,000)

Cash from financing activities..................................................................................

396,631,008

52,374,835

15,014,305
(3,491,430)
10,319,313

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................

Cash and cash equivalents at the beginning of the year..........................................

15

137,753,494
90,135,852

(151,415,753)
241,551,605

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR ................

15

227,889,346

90,135,852

Significant non-cash transactions, which have been excluded from the statement of cash flows, are as follows:
Accounts payable and accruals fair value adjustment for derivatives..................
Receivables and prepayments fair value adjustment for derivatives ....................
Increase in value of employee incentive scheme ......................................................

1,247,562
(3,351,929)
(7,279,019)

The attached notes 1 to 29 form part of these consolidated financial statements.

F-44

(1,599,758)

NATIONAL CENTRAL COOLING COMPANY (PJSC)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2004
Retained
earnings
AED

Proposed
dividend
AED

Cumulative
changes in fair
value of
derivatives
AED

Share capital
AED

Statutory
reserve
AED

Balance at 31 December 2002.................

Net profit for the year ............................
Changes in fair value of derivatives .......
Transfer to statutory reserve ..................
Proposed dividend (note 18)...................

500,000,000

3,065,840

2,094,365

19,559,193
23,373,321

(2,094,365)
(15,000,000)

15,000,000

(2,818,429)

(1,496,871)

519,806,604
23,373,321
(1,496,871)

Balance at 31 December 2003.................

Dividend paid .........................................
Net profit for the year ............................
Changes in fair value of derivatives .......
Transfer to statutory reserve ..................
Proposed dividend (note 18)...................

500,000,000

5,160,205

2,754,166

25,838,149

31,585,027

(2,754,166)
(25,000,000)

15,000,000
(15,000,000)

25,000,000

(4,315,300)

(2,104,367)

541,683,054
(15,000,000)
31,585,027
(2,104,367)

Balance at 31 December 2004.................

500,000,000

7,914,371

29,669,010

25,000,000

(6,419,667)

556,163,714

The attached notes 1 to 29 form part of these consolidated financial statements.

F-45

Total
AED

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
1
ACTIVITIES
National Central Cooling Company PJSC is registered in the United Arab Emirates as a Public Joint
Stock Company pursuant to the U.A.E. Commercial Companies Law No. 8 of 1984 (as amended).
The principal objectives of the Company are to construct, own, assemble, install, operate and
maintain cooling and conditioning systems. In addition, the Companys objectives include to distribute
and sell chilled water for use in district cooling technologies.
The Companys registered office is located at P O Box 32444, Dubai, United Arab Emirates.
The consolidated financial statements were authorised for issue in accordance with a resolution of the
Board of Directors on 14 February 2005.
The total number of employees as at 31 December 2004 was 399 (2003: 223).
2

SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation
The consolidated financial statements have been prepared in accordance with Standards issued, or
adopted by the International Accounting Standards Board, and interpretations issued by the
International Financial Reporting Interpretations Committee and applicable requirements of the UAE
Commercial Companies Law of 1984 (as amended).
The financial statements have been presented in United Arab Emirates Dirhams (AED).
The significant accounting policies adopted are as follows:
Accounting convention
The consolidated financial statements are prepared under the historical cost convention as modified
for the measurement at fair value of derivative financial instruments and the advance to employee
incentive scheme.
The accounting policies are consistent with those used in the previous year.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and each
of its controlled subsidiaries for the year ended 31 December. All significant inter-company balances,
transactions and profits have been eliminated on consolidation.
The financial statements of subsidiaries are prepared for the same reporting year as the parent
company, using consistent accounting policies. Where subsidiary financial statements are drawn up to
different reporting dates, adjustments are made. Adjustments are made to bring into line any
dissimilar accounting policies that may exist.
Minority interest principally represents the interest in subsidiaries not held by the Company.
Revenue recognition
Sales are recognised when the significant risks and rewards of ownership of the goods and services
have passed to the buyer and the amount of revenue can be measured reliably. For sale of chilled
water, revenue comprises of available capacity and variable output provided to customers and is
recognised when services are provided.
Contract revenue represents the total sales value of work performed during the year, including the
estimated sales value of contracts in progress assessed on a percentage of completion method,
measured by reference to total cost incurred to date to estimated total cost of the contract. Provision
is made for any known losses and contingencies.
Interest revenue is recognised as interest accrues.
F-46

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
2

SIGNIFICANT ACCOUNTING POLICIES continued

Capital work in progress

Capital work in progress is recorded at cost which represents the contractual obligations of the
Company for the construction of the plant. Allocated costs directly attributable to the construction of
the asset are capitalised. The capital work in progress is transferred to the appropriate asset category
and depreciated in accordance with the Companys policies when construction of the asset is
completed and commissioned.
Plant, furniture and equipment
Plant, furniture and equipment is stated at cost less accumulated depreciation and any impairment in
value. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as
follows:
Plant and buildings
Furniture and fixtures
Office equipment and instruments
Motor vehicles

over
over
over
over

25 years
3 to 4 years
3 to 4 years
4 to 5 years

The carrying values of plant, furniture and equipment are reviewed for impairment when events or
changes in circumstances indicate the carrying value may not be recoverable. If any such indication
exists and where carrying values exceed the estimated recoverable amount, the assets are written down
to their recoverable amounts.
Investments in associates
The Companys investments in associates are accounted for under the equity method of accounting.
These are entities in which the Company has between 20% to 50% of the voting power or over which
it exercises significant influence. Investments in associates are carried in the balance sheet at cost, plus
post-acquisition changes in the Companys share of net assets of the associate, less any impairment in
value. The income statement reflects the Companys share of the results of its associates.
Interest in joint venture
The Companys interest in its joint venture is accounted for by proportionate consolidation, which
involves recognising a proportionate share of the joint ventures assets, liabilities, income and expenses
with similar items in the consolidated financial statements on a line-by-line basis.
Intangibles
Goodwill
Goodwill represents the excess of the cost of the acquisition over the fair value of identifiable net
assets of a subsidiary or associate at the date of acquisition. Goodwill is amortised using the straightline method over the expected period of benefit being twenty years.
Trademarks
Costs relating to the registration of trademarks are capitalised and amortised using the straight-line
method over the expected period of benefit being five years.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of an asset are
capitalised (net of interest income on temporary investment of borrowings) as part of the cost of the
asset until the asset is commissioned for use. Borrowing costs in respect of completed assets or not
attributable to assets are expensed in the period in which they are incurred.
Contract work in progress
Contract work in progress represents cost plus attributable profit less provision for foreseeable losses
and progress payments received and receivable.
F-47

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
2

SIGNIFICANT ACCOUNTING POLICIES continued

Impairment and uncollectibility of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence
that a financial asset or group of financial assets may be impaired. If such evidence exists, the
estimated recoverable amount of that asset is determined and any impairment loss recognised for the
difference between the recoverable amount and the carrying amount. Impairment losses are recognised
in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are those expenses incurred
in bringing each product to its present location and condition, as follows:
*

Raw materials, consumables and goods

for resale
Work in progress and finished goods

purchase cost on a first-in, first-out basis.

costs of direct materials and labour plus

attributable overheads based on a normal
level of activity.

Net realisable value is based on estimated selling price less any further costs expected to be incurred
on completion and disposal.
Accounts receivable
Accounts receivable are stated at original invoice amount less a provision for any uncollectible
amounts. An estimate for doubtful debts is made when collection of the full amount is no longer
probable. Bad debts are written off as incurred.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand, bank balances and short-term deposits with an
original maturity of three months or less. For the purpose of the Statement of Cash Flows, cash and
cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank
overdrafts.
Accounts payable and accruals
Liabilities are recognised for amounts to be paid in the future for goods or services received, whether
billed by the supplier or not.
Provisions
Provisions are recognised when the Company and its subsidiaries have an obligation (legal or
constructive) arising from a past event and the cost to settle the obligation is both probable and able
to be reliably measured.
Term loans and Islamic loans
The term loans and Islamic loans are carried on the balance sheet at their principal amount.
Instalments due within one year are shown as a current liability. Interest on term loans and
fluctuating profit charges on Islamic loans are charged as an expense or capitalised as part of capital
work in progress in accordance with International Accounting Standard No 23 as it accrues, with
unpaid amounts included in accounts payable and accruals.
Leases
Finance leases, which transfer to the Company and its subsidiaries substantially all the risks and
benefits incidental to ownership of the leased item, are capitalised at inception of the lease at the fair
value of the leased asset or, if lower, 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
recognised directly in the income statement.
F-48

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
2
SIGNIFICANT ACCOUNTING POLICIES continued
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the
leased item are classified as operating leases. Operating lease payments are recognised as an expense
in the income statement on a straight line basis over the lease term.
Employees end of service benefits
The Company and its subsidiaries provide end of service benefits to its expatriate employees. The
entitlement to these benefits is based upon the employees final salary and length of service, subject to
the completion of a minimum service period. The expected costs of these benefits are accrued over the
period of employment.
With respect to its national employees, the Company and its subsidiaries make contributions to the
relevant UAE Government pension scheme calculated as a percentage of the employees salaries. The
obligations under these schemes are limited to these contributions, which are expensed when due.
Derivative financial instruments
The Company uses derivative financial instruments such as interest rate swaps and caps to hedge its
risks associated with interest rate currency fluctuations. Such derivative financial instruments are
stated at fair value. The fair value of interest rate swap and cap contracts is determined by reference
to market values for similar instruments. Derivatives with positive market values (unrealised gains)
are included in other assets and derivatives with negative market values (unrealised losses) are
included in other liabilities in the balance sheet.
For the purposes of hedge accounting, hedges are classified as either fair value hedges where they
hedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedges
where they hedge exposure to variability in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a forecasted transaction.
In relation to fair value hedges which meet the conditions for hedge accounting, any gain or loss
from remeasuring the hedging instrument at fair value is recognised immediately in the income
statement. Any gains or losses on the hedged item attributable to the hedged risk are adjusted against
the carrying amount of the hedged item and recognised in the income statement. Where the
adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment
is amortised to the income statement such that it is fully amortised by maturity.
In relation to cash flow hedges which meet the conditions for hedge accounting, the portion of the
gain or loss on the hedging instrument that is determined to be an effective hedge is recognised
initially in equity and the ineffective portion is recognised in the income statement. The gain or loss
on effective cash flow hedges recognised initially in equity is either transferred to the income
statement in the period in which the underlying transaction impacts the income statement or
capitalised with other borrowing costs directly attributable to the construction of each plant as part
of the capital work in progress. The capitalisation of gain or loss ceases when the asset is
commissioned for use.
For derivatives that do not qualify for special hedge accounting, any gain or loss arising from
changes in fair value is taken to the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or
exercised, or no longer qualifies for special hedge accounting. At that point in time, any cumulative
gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted
transaction occurs.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date. All differences are taken to the income statement.
F-49

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
2
SIGNIFICANT ACCOUNTING POLICIES continued
Financial instruments
Financial instruments comprise receivables, deposits, bank balances and cash, payables and certain
other assets and liabilities.
Fair values of financial instruments are based on estimated fair values using methods such as the net
present value of future cash flows.
The fair value of interest bearing items is estimated based on discounted cash flows using interest
rates for items with similar terms and risk characteristics. The fair value of investments traded in
organised markets is determined by reference to quoted market bid prices.
For unquoted equity investments, fair value is determined by reference to the market value of a
similar investment or is based on the expected discounted cash flows.

F-50

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
3

SEGMENTAL ANALYSIS

Income statement

Services
AED

Chilled water
AED

Contracting Manufacturing
AED
AED

Total
AED

2004:
Revenues ..........................................
Operating costs ................................

13,606,154
(4,833,419)

101,494,191
(51,407,766)

83,987,309
(67,367,197)

42,997,046
(27,179,801)

242,084,700
(150,788,183)

Gross profit......................................

8,772,735

50,086,425

16,620,112

15,817,245

91,296,517

Segmental profit...............................

3,213,019

6,524,637

16,319,241

9,436,330

35,493,227

Minority interests.............................

(3,908,200)

Net profit for the year .....................

31,585,027

2003:
Revenues ..........................................
Operating costs ................................

9,288,267
(4,964,778)

75,458,917
(33,896,578)

74,500,000
(68,508,279)

31,727,867
(21,174,656)

190,975,051
(128,544,291)

Gross profit......................................

4,323,489

41,562,339

5,991,721

10,553,211

62,430,760

Segmental profit...............................

428,245

12,904,724

6,773,952

4,876,177

24,983,098

Minority interests.............................

(1,609,777)

Net profit for the year .....................

23,373,321

Assets and liabilities

2004:
Segment assets .................................

17,729,123

1,464,981,476

140,144,530

37,649,295

1,660,504,424

Segment liabilities ............................

6,232,983

978,900,949

90,117,875

14,559,058

1,089,810,865

2003:
Segment assets .................................

5,415,105

1,138,459,235

67,765,668

31,166,362

1,242,806,370

Segment liabilities ............................

4,286,861

634,572,265

39,865,363

14,412,455

693,136,944

The Company is organised as one geographical segment and consequently, no secondary information
is required to be provided.
4

OTHER INCOME

Interest income ..................................................................................................

Miscellaneous.....................................................................................................

F-51

2004
AED

2003
AED

3,961,583
3,796,883

1,209,008
881,663

7,758,466

2,090,671

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
5
BASIC EARNINGS PER SHARE
Earnings per share are calculated by dividing the net profit for the year by the weighted average
number of shares outstanding during the year as follows:
2004
2003
Net profit for the year (AED) ...........................................................................

31,585,027

23,373,321

Ordinary shares issued.......................................................................................

50,000,000

50,000,000

Earnings per share (AED) ................................................................................

0.63

0.47

6
RESULTS OF SUBSIDIARIES
Included in the consolidated income statement for the years ended 31 December 2003 and 2004 are
the following in respect of subsidiary operations:

Revenues........................................................................................................
Expenses ........................................................................................................
Net profit for the year before minority interest ............................................

2004
2003
AED
AED
144,018,570
119,305,683
(116,577,783) (107,784,656)
27,440,787

11,521,027

2004
AED

2003
AED

7
CAPITAL WORK IN PROGRESS
The movement in capital work in progress during the year is as follows:

Balance at 1 January .....................................................................................

Additions during the year .............................................................................
Transfer to plant, furniture and equipment (note 8) ....................................

116,264,445
380,266,733
205,774,009
265,957,729
(17,025,346) (529,960,017)

Balance at 31 December................................................................................
Advances to contractors................................................................................

305,013,108
25,855,943

116,264,445
12,910,445

330,869,051

129,174,890

A substantial portion of capital work in progress has been funded under Islamic financing
arrangements and term loans (notes 20 and 21). Upon completion of the construction of plants under
Istisnaa financing arrangements, the total cost of the plant is financed under an Islamic Ijara
agreement.
Istisnaa is a sales contract between a contract owner (the Islamic financing institution) and a
contractor (the Company) whereby the contractor, based on an order from the contract owner,
undertakes to manufacture or otherwise acquire the subject matter of the contract according to
specifications, and sells it to the contract owner for an agreed upon price and method of settlement
whether that be in advance, by instalments or deferred to a specific future time.
In addition, AED 220,462,866 (2003: AED 46,386,126) is included in capital work in progress which
has been funded under a separate Islamic financing arrangement.
Included in additions to capital work in progress are capitalised financing costs amounting to AED
23,300,142 (2003: AED 7,142,265).

F-52

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
8

PLANT, FURNITURE AND EQUIPMENT

Plant and
buildings
AED

Cost:
At 1 January 2004........................
Additions......................................
Transfer from capital work in
progress (note 7) ..........................
Transfers ......................................
Disposals ......................................
At 31 December 2004 ......................
Depreciation:
At 1 January 2004........................
Charge for the year ......................
Relating to transfers and
disposals .......................................

Office
Furniture and equipment and
fixtures
instruments Motor vehicles
AED
AED
AED

879,967,257
553,392

10,749,520
1,218,491

17,025,346
6,685,849
(78,736,918)

(6,685,849)
(40,000)

825,494,926

5,242,162

11,641,215

(31,937,507)
(34,086,138)

(2,105,983)
(770,702)

(3,513,923)
(1,161,280)

2,864,677

8,290,682
3,350,533

97,754

1,867,950
579,000

(415,750)
2,031,200

Total
AED
900,875,409
5,701,416
17,025,346

(79,192,668)
844,409,503

(915,759)
(397,364)

(38,473,172)
(36,415,484)

410,623

3,373,054

(902,500)

(71,515,602)

At 31 December 2004 ......................

(63,158,968)

(2,778,931)

(4,675,203)

Net carrying amount:

At 31 December 2004 ......................

762,335,958

2,463,231

6,966,012

1,128,700

772,893,901

At 31 December 2003 ......................

848,029,750

8,643,537

4,776,759

952,191

862,402,237

The depreciation charge for the year has been dealt with as follows:

Included in operating costs................................................................................

Included in other administrative expenses.........................................................
Included in capital work in progress .................................................................

2004
AED

2003
AED

32,980,545
3,343,582
91,357

20,534,590
2,689,548
58,455

36,415,484

23,282,593

At 31 December 2004, the net book value of plants financed by an Islamic Ijara loan under sale and
leaseback Ijara financing arrangements amounted to AED 407,973,838 (2003: AED 186,104,204).
The plants are constructed on land which has been granted to the Company and one of its
subsidiaries at nominal or no cost to them.

F-53

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
9
INVESTMENTS IN ASSOCIATES
The Company has the following investments in associates:

Industrial City Cooling Company

Qatar Central Cooling Company PJSC

Country of incorporation
Emirate of Abu Dhabi
State of Qatar

Ownership
2004
2003
20%

44.5%
44.5%

Both associates are involved in the same business activity as the Company. The reporting dates for
both the associates are identical to the Company.
The following is a summary of the carrying value of the investments:
2004
AED

2003
AED

Cost of investments .......................................................................................

Share of post acquisition results ...................................................................

18,746,611
(227,711)

4,978,051

Carrying value of investments.....................................................................

18,518,900

4,978,051

Management believe that the carrying value of the investments will be realised in full.
10 INTEREST IN JOINT VENTURE
During the year, the Company invested AED 5.4 million in a joint venture, SNC Lavalin Gulf
Contractors, a limited liability company incorporated in the Emirate of Abu Dhabi.
The share of the assets and liabilities of the joint venture at 31 December 2004 included in the
consolidated financial statements is as follows:
2004
AED
Current assets ........................................................................................................................
Non-current assets .................................................................................................................

20,391,586
2,599,270
22,990,856

Current liabilities ...................................................................................................................

Non-current liabilities............................................................................................................

17,773,850
58,284
17,832,134

There are no revenues or expenses of the joint venture for the year ended 31 December 2004 included
in the consolidated financial statements.
11 ADVANCE TO EMPLOYEE INCENTIVE SCHEME
The employee incentive scheme represents an advance extended to fund the employee incentive
scheme, which was formed in accordance with the Board of Directors resolution dated 17 December
2000. At 31 December 2004, the incentive scheme held 374,553 shares (2003: 420,271 shares) in the
Company, which are held in the name of a related party acting as a custodian. The advance to the
scheme is interest-free and is principally recoverable after one year from the balance sheet date.

F-54

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
11 ADVANCE TO EMPLOYEE INCENTIVE SCHEME continued
The movements on the advance to employee incentive scheme recognised in the balance sheet are as
follows:
2004
2003
AED
AED
Balance at 1 January
Employees incentive scheme awarded during the year
Advance made during the year
Increase in value of advance in the year due to movements in the market
value of the Companys shares
Balance at 31 December
12

5,673,662
(821,680)
285,430

4,059,448

14,456

7,279,019

1,599,758

12,416,431

5,673,662

INTANGIBLES
Goodwill
2004
AED

2003
AED

Trademarks
2004
2003
AED
AED

Total
2004
AED

2003
AED

Balance at 1 January....................
Additions during the year ............
Amortisation for the year ............

11,058,703
19,772,407
(800,936)

11,591,130
220,000
(752,427)

74,697

(60,573)

98,373

(23,676)

11,133,400
19,772,407
(861,509)

11,689,503
220,000
(776,103)

Balance at 31 December ..............

30,030,174

11,058,703

14,124

74,697

30,044,298

11,133,400

13

TRADE AND OTHER RECEIVABLES

Trade accounts receivable .............................................................................

Due from related parties ...............................................................................
Other receivables ...........................................................................................

14

2004
AED

2003
AED

113,913,819

17,411,436

65,556,139
635,536
1,653,245

131,325,255

67,844,920

2004
AED
158,844,279
(88,386,819)

2003
AED
74,500,000
(45,065,009)

70,457,460

29,434,991

CONTRACT WORK IN PROGRESS

Cost plus attributable profit..........................................................................

Less: progress billings....................................................................................

15 CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the statement of cash flows include the following balance sheet
amounts:
2004
2003
AED
AED
Bank balances and cash ................................................................................
Bank overdrafts .............................................................................................

255,389,978
(27,500,632)

110,600,318
(20,464,466)

227,889,346

90,135,852

Bank balances and cash include bank deposits of AED 144,104,163 (2003: AED 40,287,622) placed
with commercial banks in the United Arab Emirates. These are denominated in AED with effective
rates in the range of 0.875% to 3.5% (2003: 0.875% to 2.5%).
F-55

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
16

SHARE CAPITAL

Authorised,
issued and
fully paid
2004 & 2003
AED
50,000,000 ordinary shares of AED 10 each ........................................................................... 500,000,000
17 STATUTORY RESERVE
As required by the U.A.E. Commercial Companies Law of 1984 (as amended) and the articles of
association of the Company and its subsidiaries, 10% of the net profit for the year is transferred to
the statutory reserve. The transfer for the year represents 10% of the profit of the Company before
accounting for the Companys share in the results of its subsidiaries, and the Companys share in the
subsidiaries statutory reserve transferred for the year. 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.
18 PROPOSED DIVIDEND
The Board of Directors has proposed dividend amounting to AED 25,000,000 or AED 0.5 per share
(2003: AED 15,000,000 or AED 0.3 per share). The dividend will be submitted for approval at the
Annual General Meeting in 2005.
19 MINORITY INTERESTS
The movement in minority interests recognised in the balance sheet is summarised as follows:
2004
AED

2003
AED

Balance at 1 January .....................................................................................

Contribution during the year ........................................................................
Purchase of minority interests during the year .............................................
Dividend paid ................................................................................................
Share of results of subsidiary companies during the year ............................

7,986,372
4,876,781
(1,041,508)
(1,200,000)
3,908,200

6,216,595
160,000

1,609,777

Balance at 31 December................................................................................

14,529,845

7,986,372

F-56

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
20

TERM LOANS

Bilateral bridging loan...................................................................................

Term loans.....................................................................................................
Other loan .....................................................................................................

Due in less than one year

Term loans.....................................................................................................
Other loan .....................................................................................................

Due in more than one year

Term loans...................................................................................................
Other loan .....................................................................................................

2004
AED

2003
AED

239,705,494
287,748

44,076,000
140,843,594

239,993,242

184,919,594

26,180,000
132,840

15,680,000

26,312,840

15,680,000

213,525,494
154,908

169,239,594

213,680,402

169,239,594

239,993,242

184,919,594

The bilateral bridging loan was repaid in full in June 2004.

The term loans are secured by pledges over plant and capital work in progress and a corporate
guarantee in accordance with the facility agreements and are summarised as follows:
*

The first term loan amounting to AED 135 million was repaid in full in 2004.

The second term loan amounting to AED 7,423,594 is repayable in 4 annual instalments, 3
instalments each of AED 1,680,000 commencing January 2003 and the last instalment for the
remaining balance. This loan carries interest at 1.5% over 6 months EBOR.

On 24 November 2003, the Company entered into a 12 year, AED 700,000,000 term loan
facility agreement (the new facility) with a syndicate of international and UAE based banks.
This facility agreement is to acquire new central cooling plants, and was used to refinance the
term loan amounting to AED 135 million, which is secured over previously constructed central
cooling plants, along with the repayment of the bilateral bridging loan of AED 44 million. As
at 31 December 2004, the Company has drawn down an amount of AED 250 million under the
new facility, repayable in 24 semi annual instalments commencing 1 October 2004 in accordance
with an agreed upon schedule.

As the term loans attract interest at rates which vary with market movements, the fair value of the
term loans approximates their carrying value.
At 31 December 2004, unutilised term loan facilities available to the Company amounted to AED 450
million (2003: AED 521 million).

F-57

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
21

ISLAMIC FINANCING ARRANGEMENTS

Ijara loans......................................................................................................
Istisnaa loans................................................................................................
Muqawala loans (net of deferred margin of AED 20,904,340, (2003:
AED 23,703,334))..........................................................................................

Due in more than one year:

Ijara loans......................................................................................................
Istisnaa loans................................................................................................
Muqawala loans ............................................................................................

Due in less than one year:

Ijara loans......................................................................................................
Muqawala loans ............................................................................................

2004
AED

2003
AED

333,718,627
180,075,029

241,000,000

130,146,830

46,383,126

643,940,486

287,383,126

324,322,983
180,075,029
121,826,103

241,000,000

42,195,906

626,224,115

283,195,906

9,395,644
8,320,727

4,187,220

17,716,371

4,187,220

643,940,486

287,383,126

Ijara and Istisnaa loans:

The Islamic Ijara and Istisnaa loans consist of a number of facilities, which are secured by an
assignation of the plant purchased under the Islamic financing arrangement and a joint credit and
Islamic loan facility agreement.
Facility 1
The first facility of AED 150,000,000 is repayable in 16 fixed semi-annual instalments commencing
from 18 March 2004 and a fluctuating profit charge is paid under the Islamic financing agreements,
which is based on EIBOR plus a margin. The amount outstanding at 31 December 2004 is AED
146,293,597 (2003: AED 150,000,000).
Facility 2
During the period, the Company repaid the second facility amounting to AED 91,000,000.
Facility 3 (Sukuk Financing)
On 2 March 2004, the Company entered into Purchase and Ijara Agreements (the Agreement) with
Tabreed Financing Corporation for the sale and leaseback of certain assets of the Company as
specified in the Agreement with a total cost of US $51 million (AED 187.4 million).
Furthermore, the Company entered into an Istisnaa Agreement dated 2 March 2004 with Tabreed
Financing Corporation for the manufacture and commission of certain assets as specified in the
Istisnaa Agreement amounting to US $49 million (AED 180 million). On completion, the specified
assets will be sold and leased back from Tabreed Financing Corporation under similar arrangements
as specified in the existing Ijara Agreement above.
In March 2009, the Company will purchase the assets leased back under the Ijara Agreement from
Tabreed Financing Corporation for an amount of US $100 million, which is the full repayment of the
Ijara and Istisnaa loans referred to above.
The Ijara Agreement carries 10 semi-annual rental payments of AED 5,154,000 commencing 2
September 2004. In respect of the Istisnaa assets, the Company is obligated to make 10 semi-annual
pre-rental payments of AED 4,952,062 commencing 2 September 2004.
F-58

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
21

ISLAMIC FINANCING ARRANGEMENTS continued

Muqawala loans:
The Company has entered into two Islamic Muqawala loan arrangements as follows:
*

The first Muqawala loan amounting to AED 29 million (31 December 2003: AED 31.4 million)
is in respect of the procurement and manufacturing of certain items for use in the construction
of plants under an Islamic loan facility agreement dated 31 July 2002. The facility is repayable
in 14 semi-annual instalments commencing from 29 January 2003. A fluctuating profit charge is
paid under the Islamic financing agreement which is based on market rates.

The second Muqawala loan amounting to AED 101 million (31 December 2003: AED 15
million) is in respect of the construction of a project under an Islamic loan facility dated 25
March 2003. The facility is repayable in 16 semi-annual rental instalments commencing on 1
May 2006. A variable element is payable with each instalment which is based on market rates
plus a mark up.

At 31 December 2004, unutilised Islamic funding available to the Company amounted to AED 18.7
million (31 December 2003: AED 110 million).
As the Islamic loan arrangements except for facility 3 attract a fluctuating profit charge which varies
with market interest rate movements, the fair value of such Islamic loans approximates their carrying
value. Information on facility 3s principal characteristics is presented above.

22 EMPLOYEES END OF SERVICE BENEFITS

The Company and its subsidiaries provide for employees end of service benefits in accordance with
the employees contracts of employment. The movements in the provision recognised in the balance
sheet are as follows:
2004
2003
AED
AED
Balance at 1 January .....................................................................................
Net movement during the year .....................................................................

3,451,744
2,151,846

2,068,608
1,383,136

Balance at 31 December................................................................................

5,603,590

3,451,744

2004
AED

2003
AED

70,544,856
17,798,140
1,247,563
54,017,175
13,006,071
14,964,830

81,023,813
12,174,210
2,386,142
14,720,055
23,910,180
17,947,762

171,578,635

152,162,162

1,194,280

38,933,434
5,822,418

1,194,280

44,755,852

23

ACCOUNTS PAYABLE AND ACCRUALS

Amounts due in less than one year

Accounts payable ..........................................................................................
Retentions payable ........................................................................................
Negative fair value of derivatives..................................................................
Other payables...............................................................................................
Payable to former shareholders.....................................................................
Accrued expenses...........................................................................................

Amounts due in more than one year

Accounts payable ..........................................................................................
Retentions payable ........................................................................................

F-59

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
24 RELATED PARTY TRANSACTIONS
These represent transactions with related parties ie. shareholders, senior management of the Company
and companies of which they are principal owners. Pricing policies and terms of these transactions
are made on a commercial basis and approved by senior management.
Included in additions to capital work in progress is AED 354,525 (2003: AED 1,750,000) in respect of
transactions with related parties. Included in trade and other receivables is AED 218,603 (2003: AED
635,536) representing expenses which have been incurred on behalf of a related party.
25 CONTINGENT LIABILITIES
The Company and its subsidiaries bankers have issued guarantees on their behalf as follows:

Performance guarantees ................................................................................

Advance payment guarantees........................................................................
Retention release guarantees .........................................................................
Financial guarantees......................................................................................

26

2004
AED
18,755,781
1,525,342
4,506,505
13,204,200

2003
AED
13,050,000
3,916,730
5,234,250
13,921,600

37,991,828

36,122,580

FINANCIAL INSTRUMENTS

Fair values
The fair values of the financial assets and liabilities of the Company and its subsidiaries are not
materially different from their carrying values at the balance sheet date.
27 CAPITAL COMMITMENTS
The Board of Directors have authorised future capital expenditure amounting to AED 1,179.3 million
(2003: AED 762.3 million). Included in this amount is AED 778.8 million (2003: AED 390 million)
which is expected to be incurred within one year from the balance sheet date.
28

SUBSIDIARIES

Gulf Energy Systems LLC.................................................................................

National Central Cooling Company Ras Al Khaimah LLC ............................
Emirates Preinsulated Pipes Industries LLC .....................................................
Installation Integrity 2000 LLC.........................................................................
BAC Balticare Gulf LLC ..................................................................................
Summit District Cooling Company ...................................................................
Bahrain District Cooling Company...................................................................
Ian Banham and Associates ..............................................................................

Country of
incorporation
U.A.E.
U.A.E.
U.A.E.
U.A.E.
U.A.E.
U.A.E.
Bahrain
U.A.E.

Percentage
of holding
100
100
60
60
100
51
55
70

Gulf Energy Systems LLC was registered on 15 April 1995 and commenced its commercial activities
thereafter.
National Central Cooling Company Ras Al Khaimah LLC was registered on 22 November 1999 and
commenced its commercial activities thereafter. Effective 1 July 2004, the Company became a wholly
owned subsidiary. Prior to that date it was a 60% owned subsidiary.
Emirates Preinsulated Pipes Industries LLC was registered on 13 December 2000 and commenced its
commercial activities in May 2002.
Installation Integrity 2000 LLC, which was acquired in 2002, was registered on 15 May 2000 and
commenced its commercial activities thereafter.
BAC Balticare Gulf LLC was registered on 7 April 2003 and commenced its commercial activities
thereafter.
F-60

NATIONAL CENTRAL COOLING COMPANY (PJSC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 December 2004
28 SUBSIDIARIES continued
The Company acquired a 51% interest in a newly formed subsidiary, Summit District Cooling
Company (SDCC) on 29 May 2004. SDCC commenced its commercial activities thereafter.
The Company acquired a 55% interest in a newly formed subsidiary, Bahrain District Cooling
Company (BDCC) on 31 October 2004. BDCC commenced its commercial activities thereafter.
The Company acquired a 70% interest in Ian Banham and Associates on 27 October 2004. Ian
Banham and Associates is already engaged in commercial activities.
29 RISK MANAGEMENT
Interest rate risk
The Company and its subsidiaries are exposed to interest rate risk on their interest bearing assets and
liabilities (bank overdrafts and loans). Whilst current interest rates are low, management has sought
to limit the exposure of the Company and its subsidiaries to any adverse future movements in interest
rates by entering into various interest rate swap and cap deals during the year. The notional amount
outstanding at 31 December 2004 was AED 1,080 million (2003: AED 220.5 million). Included in this
amount is AED 619 million relating to instruments which have effective dates after 31 December
2004. The derivative financial instruments entered into for the purposes of a cash flow hedge had
negative changes in their values (unrealised losses) amounting to AED 6,419,667 (2003: AED
4,315,300) which have been recognised within equity under cumulative changes in fair values of
derivatives. Management is therefore of the opinion that the Company and its subsidiaries exposure
to interest rate risk is limited.
Credit risk
The Company and its subsidiaries seek to limit their credit risk with respect to customers by
monitoring outstanding receivables. The Company and its subsidiaries sell their services and products
to a number of institutions in the UAE. Their three largest customers account for approximately 63%
of outstanding accounts receivable at 31 December 2004 (2003: 3 customers 60%). As amounts
receivable are stated net of any required provision and are short term in nature, fair value
approximates carrying value.
Liquidity risk
The Company and its subsidiaries limit their liquidity risk by monitoring their current financial
position in conjunction with their cash flow forecasts on a regular basis to ensure funds are available
to meet their commitments for liabilities as they fall due. The Company and the subsidiaries terms of
sale require amounts to be paid within 60 to 90 days of the date of sale. Trade payables are normally
settled within 60 days of the date of purchase.
Currency risk
The management considers that the Company and its subsidiaries are not exposed to significant
currency risk. The majority of their transactions and balances are in either UAE Dirhams or US
Dollars. As the UAE Dirham is pegged to the US Dollar, balances in US Dollars are not considered
to represent significant currency risk.

F-61

Registered/Head Office of the Issuer

Tabreed 06 Financing Corporation
Walker House
PO Box 908GT
Mary Street
George Town
Grand Cayman
Cayman Islands
Registered/Head Office of Tabreed
National Central Cooling Company (Tabreed) PJSC
PO Box 32444
Abu Dhabi
UAE
Auditors of the Issuer
Ernst & Young
PO Box 510GT
Grand Cayman
Cayman Islands
Auditors of Tabreed
Ernst & Young
PO Box 136
Abu Dhabi
UAE
Trustee
Tabreed 06 Financing Corporation
Walker House
PO Box 908GT
Mary Street
George Town
Grand Cayman
Cayman Islands
Delegate
HSBC Trustee (C.I.) Limited
PO Box 88
1 Grenville Street
St Helier
Jersey JE4 9PF
Channel Islands
Principal Paying Agent, Payment Administrator, Calculation Agent, Registrar and Transfer Agent
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom

Legal Advisers
To the Issuer
as to Cayman Islands law

To Tabreed
as to English and UAE law

Walkers (Dubai) LLP

5th Floor, The Exchange Building
Dubai International
Financial Centre
Dubai UAE

Linklaters
Suite 4, Third Floor
Gate Building 3
Dubai International Financial Centre
Dubai UAE

To the Managers and the Delegate

as to English and UAE law
Allen & Overy LLP
One New Change
London EC4M 9QQ
United Kingdom

Allen & Overy LLP

PO Box 3251
1603 API World Tower
Sheikh Zayed Road
Dubai UAE
Islamic Structuring Consultant
Islamic Finance Consultants
24th Floor, Almoayyed Tower
PO Box 21258
Manama
Kingdom of Bahrain
Financial Advisor to Tabreed
Chescor Capital
318 Building No. 2
Dubai Media City
Dubai UAE
and
100 Pall Mall
London SW1Y 5HP
United Kingdom

imprima de bussy C94235