Annual financial statement
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Emirates Central Cooling Systems Corporation P.J.S.C Directors’ report and consolidated financial statements for the year ended 31 December 2024
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Emirates Central Cooling Systems Corporation P.J.S.C Directors’ report and consolidated financial statements for the year ended 31 December 2024 Page(s) Directors’ report 1-4 Independent auditor’s report 5-10 Consolidated statement of financial position 11-12 Consolidated statement of comprehensive income 13 Consolidated statement of changes in equity 14 Consolidated statement of cash flows 15-16 Notes to the consolidated financial statements 17-83
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Emirates Central Cooling Systems Corporation P.J.S.C (1) ( Directors’ report for the year ended 31 December 2024 Directors’ report The Board of Directors present their report and audited consolidated financial statements of Emirates Central Cooling Systems Corporation P.J.S.C (the “Company”) and its subsidiaries (together referred to as the “Group”) for the year ended 31 December 2024. Principal activities The principal activities of the Group are the provision of district cooling services, operations and maintenance of central cooling plants and related distribution networks and manufacturing of pre-insulated pipes for district cooling services. Financial and operational performance The Group has recorded a net profit attributable to the equity holders of the Company amounting to AED 896,754 thousand for the year ended 31 December 2024. The Group achieved a turnover of AED 3,260,489 thousand during the year 2024, which represented a growth of 7.4% compared to the last year and achieved an operating profit of AED 1,192,444 thousand, which represented a growth of 6.5% compared to the previous year 2023. Share capital The paid -up capital of the Company is AED 1,000,000 thousand consisting of 10,000,000 thousand shares of AED 0.10 each. There has been no change in the capital structure of the Company during the year ended 31 December 2024. Transfer to statutory reserve The transfer of profit to the statutory reserve has been suspended as the reserve has reached 50% of the paid-up share capital in prior years. Dividend During the year 2024 , a final dividend of AED 425,000 thousand (AED 0.0425 per share) in respect of the year ended 31 December 2023 was declared and approved in the Annual General Assembly Meeting held on 27 March 2024 which was paid on 2 4 April 2024 (2023: Final dividend of AED 425,000 thousand (AED 0. 0425 per share)). Further an interim dividend of AED 425,000 thousand (AED 0.0425 per share) in respect of the six-month period ended 30 June 2024 was declared and approved on 23 September 2024 by the Board of Directors and subsequently paid on 18 October 2024 (2023: Interim dividend of AED 425,0 00 thousand (AED 0.0425 per share)).
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Emirates Central Cooling Systems Corporation P.J.S.C (2) ( Directors’ report for the year ended 31 December 2024 (continued) Key agreements signed During the year 2024, Empower has signed 120 new agreements in and around its existing concession agreements with a total demand capacity of approximately 96,512 RT. With these newly signed agreements, Empower’s total contracted capacity has reached 1.76 million RT. Amongst the agreements signed during the year, Empower has signed an agreement with Al Habtoor Group LLC to provide 7,200 RT of district cooling services to Al Habtoor Tower by the beginning of second quarter of 2025. Awards and achievements During the year 2024, Empower achieved the Guinness World Record for the highest capacity district cooling plant for its Business Bay District Cooling Project in Dubai. With total connected capacity of 241,272 Refrigeration Tons (RT) that will scale -up to have an ultimate capacity of 451,540 RT, Empower has inscribed its name in Guinness World Record under brand-new global benchmark “The highest Cooling Capacity for a District Cooling System”. Empower was also recognised as the leading district cooling company by Dubai Supreme Council of Energy (DSCE) in the Demand Side Management Recognition Program, which honours sustainability champions in Dubai. Empower has significantly contributed towards the greener future in the Emirate by enhancing energy and water efficiencies and its commitment towards circular economy principles. Empower won four prestigious awards at the International District Energy Association Annual Conference and Exhibition (IDEA 2024) held in June 2024. Among the four awards, two awards are for innovation (Honourable Mention) for “Integrated Metering Solution s” and “Chiller Efficiency Improvement”. During the year 2024 , Empower has completed twenty years of its operations. Empower’s journey began with a single temporary plant serving the Dubai International Financial Center (DIFC) in 2004. From the beginning, Empower’s vision was “To be the World’s Leading District Cooling Service Provider”. By the directives of visionary leaders of this country, guidance of its shareholders and support from its customers, Empower has become the World’s Largest District Cooling Services provider and aims to enhance eco -efficient district cooling services in UAE and the region. Outlook The global district cooling market size valued at AED 98 billion ($26.79 billion) in 2024 is predicted to reach AED 177 billion ($48.18 billion) by the year 2032, growing at a CAGR of 7.8% during the forecast period 202 5-2032. In the coming years, due to rising awareness of environmental protection and sustainable solutions, it is expected that the district cooling industry will grow and will be a preferred cooling solution for cities to move towards climate resilient, resource-efficient and low-carbon pathways. In December 2024 quarterly economic review, UAE Central Bank (CBUAE) has maintained UAE’s growth forecast at 4% for the year 2024 and projected 4.5% for overall GDP and 5% for non -oil growth for the year 2025. We expect Empower to continue grow its connected capacity i n UAE and explore other neighboring countries to provide its energy efficient district cooling services.
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Emirates Central Cooling Systems Corporation P.J.S.C (3) ( Directors’ report for the year ended 31 December 2024 (continued) Directors The Directors who held office during the year, their committee memberships and functions, as at 31 December 2024 were as follows: Name and designation Committee Memberships H.E. Saeed Mohammed Ahmad Al Tayer Chairman Not applicable Mr. Nasser Mohammed Bin Lootah Director Audit and risk committee (Committee Member), Nomination, Remuneration and ESG Committee (Committee Member), Technical Committee (Committee Member) Mr. Hussain Essa Ibrahim Lootah Director Audit and risk committee (Committee Member), Nomination, Remuneration and ESG Committee (Committee Member), Technical Committee (Committee Chairman) Mr. Amit Kaushal Director Audit and risk committee (Committee Member), Nomination, Remuneration and ESG Committee (Committee Member) Mr. Issam Abdulrahim Abdulla Kazim Director Audit and risk committee (Committee Chairman*) Mrs. Fatma Ibrahim Abdulla Belrehif Director Audit and risk committee (Committee Member*), Nomination, Remuneration and ESG Committee (Committee Member) Mr. Majed Sultan Murad Ali Al Joker Director Nomination, Remuneration and ESG Committee (Committee Chairman*), Technical Committee (Committee Member)
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PricewaterhouseCoopers Limited Partnership Dubai Branch, License no. 102451 Emaar Square, Building 5, P O Box 11987, Dubai - United Arab Emirates T: +971 (0)4 304 3100, F: +971 (0)4 346 9150, www.pwc.com/me (5) Independent auditor’s report to the shareholders of Emirates Central Cooling Systems Corporation P.J.S.C Report on the audit of the consolidated financial statements Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Emirates Central Cooling Systems Corporation P.J.S.C (“the Company”) and its subsidiaries (together the “Group”) as at 31 December 2024, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards. What we have audited The Group’s consolidated financial statements comprise: • the consolidated statement of financial position as at 31 December 2024; • the consolidated statement of comprehensive income for the year then ended; • the consolidated statement of changes in equity for the year then ended; • the consolidated statement of cash flows for the year then ended; and • the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the consolidated financial statements in the United Arab Emirates. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
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(6) Independent auditor’s report to the shareholders of Emirates Central Cooling Systems Corporation P.J.S.C (continued) Our audit approach Overview Key Audit Matter ● Accuracy of revenue from consumption charges As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the Key audit matter Accuracy of revenue from consumption charges The Group reported revenues from district cooling services of AED 3,239,722 thousand (Note 23) for the year ended 31 December 2024 of which AED 1,895,257 thousand relates to consumption revenue, which is based on variable outputs consumed by the customers. Auditing consumption revenue component recorded by the Group is complex due to IT systems used in initiation, processing and recording of transactions, which includes a high volume of individually low monetary value transactions. The revenue is calculated based on meter readings from the systems and pre-defined rates. There is an inherent risk around the accuracy of the recognised consumption revenue given the complexity of the systems and consequently we considered this to be a key audit matter. We carried out the following procedures: • We gained an understanding of the control environment related to revenue process and identified the relevant controls, IT systems, interfaces and reports; • We evaluated the control environment by testing the general IT controls over the main systems and applications involved in the revenue recording process; • We assessed the design and operating effectiveness of controls over the capture and recording of revenue transactions; • We evaluated the management’s controls over the authorisation of rate changes and the input of this information into the billing systems, as well as the calculation of amounts billed to customers. We also tested a sample of customer bills for accuracy;
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(7) Independent auditor’s report to the shareholders of Emirates Central Cooling Systems Corporation P.J.S.C (continued) Key audit matter How our audit addressed the Key audit matter Accuracy of revenue from consumption charges (continued) • We evaluated the controls in place over manual intervention and modification of metering data, which is restricted to the meter data management system, and the manual intervention of master billing data that is restricted to the billing team; • On a sample basis, we tested the accuracy of the meter readings and checked that the data of the respective meter readings, as per the sample selected, was appropriately reflected in the billing system; • We evaluated the interface between the meter data management system and the billing system; • We evaluated the interface between billing system and financial reporting system; • We recalculated the amount of revenue recognised on a sample basis and have traced the fixed rates to the signed customer agreements and billing system; • We traced consumption charges and fuel surcharge billed to the customer invoices on a sample basis. We have also traced the rates and meter readings on the invoices; and • We assessed the appropriateness of the accounting policies and disclosures made in the consolidated financial statements. Other information The directors are responsible for the other information. The other information comprises the directors’ report (but does not include the consolidated financial statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report, and the Company’s Annual report, which is expected to be made available to us after that date. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Company’s Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
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(8) Independent auditor’s report to the shareholders of Emirates Central Cooling Systems Corporation P.J.S.C (continued) Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards and their preparation in compliance with the applicable provisions of the UAE Federal Decree Law No. (32) of 2021, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to p rovide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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(9) Independent auditor’s report to the shareholders of Emirates Central Cooling Systems Corporation P.J.S.C (continued) Auditor’s responsibilities for the audit of the consolidated financial statements (continued) • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s abi lity to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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(10) Independent auditor’s report to the shareholders of Emirates Central Cooling Systems Corporation P.J.S.C (continued) Report on other legal and regulatory requirements Further, as required by the UAE Federal Decree Law No. (32) of 2021, we report that: (i) we have obtained all the information we considered necessary for the purposes of our audit; (ii) the consolidated financial statements have been prepared and comply, in all material respects, with the applicable provisions of the UAE Federal Decree Law No. (32) of 2021; (iii) the Group has maintained proper books of account; (iv) the financial information included in the Directors’ report is consistent with the books of account of the Group; (v) as disclosed in note 1 to the consolidated financial statements the Group has purchased shares during the year ended 31 December 2024; (vi) note 12 to the consolidated financial statements discloses material related party transactions, and the terms under which they were conducted; and (vii) based on the information that has been made available to us, nothing has come to our attention which causes us to believe that the Group has contravened during the year ended 31 December 2024 any of the applicable provisions of the UAE Federal Decree Law No. (32) of 2021, or in respect of the Company, its Articles of Association which would materially affect its activities or its financial position as at 31 December 2024. PricewaterhouseCoopers Limited Partnership Dubai Branch 14 February 2025 Murad Alnsour Registered Auditor Number 1301 Dubai, United Arab Emirates
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Emirates Central Cooling Systems Corporation P.J.S.C The notes on pages 17 to 83 are an integral part of these consolidated financial statements. (11) Consolidated statement of financial position As at 31 December 2024 2023 Notes AED’000 AED’000 ASSETS Non-current assets Property, plant and equipment 5 6,995,160 6,934,815 Right-of-use assets 6 5,513 3,994 Intangible assets 7 327,825 339,982 Deferred tax assets 28 16,228 17,454 Financial assets at amortised cost 8 1,304,838 1,324,786 Financial assets at fair value through other comprehensive income 9 55,709 54,153 Investment properties 37 118,015 85,645 Investment in a joint venture 307 307 8,823,595 8,761,136 Current assets Inventories 10 53,789 43,730 Trade and other receivables 11 275,280 319,094 Due from related parties 12 18,076 8,821 Financial assets at amortised cost 8 19,949 19,105 Financial assets at fair value through profit or loss 13 25,466 10,000 Term deposits 14 30,264 27,500 Cash and cash equivalents 15 1,936,627 538,780 2,359,451 967,030 Total assets 11,183,046 9,728,166 EQUITY AND LIABILITIES EQUITY Equity attributable to equity holders of the Company Share capital 16 1,000,000 1,000,000 Statutory reserve 17 500,000 500,000 Other reserves 18,768 14,510 Contributed capital 18 82,190 82,190 Retained earnings 1,596,632 1,547,518 3,197,590 3,144,218 Non-controlling interests 175,745 166,783 Total equity 3,373,335 3,311,001
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Emirates Central Cooling Systems Corporation P.J.S.C The notes on pages 17 to 83 are an integral part of these consolidated financial statements. (13) Consolidated statement of comprehensive income Year ended 31 December 2024 2023 Notes AED’000 AED’000 Revenue 23 3,260,489 3,035,203 Interest income on financial asset at amortised cost 8 59,151 38,711 Cost of sales 25 (1,917,497) (1,740,878) Gross profit 1,402,143 1,333,036 General and administrative expenses 26 (235,119) (220,285) Reversal for expected credit losses 11 17,482 - Other income 29 7,938 7,120 Operating profit 1,192,444 1,119,871 Finance income 30 54,027 43,593 Finance costs 30 (248,139) (220,833) Finance costs- net (194,112) (177,240) Profit before tax 998,332 942,631 Income tax 28 (90,097) 17,454 Profit after tax 908,235 960,085 Profit attributable to: Equity holders of the Company 896,754 952,927 Non-controlling interests 32 11,481 7,158 908,235 960,085 Basic and diluted earnings per share for profit attributable to the equity holders of the Company (AED) 35 0.090 0.095 Profit for the year 908,235 960,085 Other comprehensive income Items that will not be reclassified to profit or loss Changes in fair value of financial assets at fair 9 value through other comprehensive income 913 1,242 Income tax impact (82) - Remeasurement of post-employment 21 benefit obligations 3,427 7,432 Other comprehensive income for the year, net of tax 4,258 8,674 Total comprehensive income for the year 912,493 968,759 Total comprehensive income for the year attributable to: Equity holders of the Company 901,012 961,601 Non-controlling interests 11,481 7,158 912,493 968,759
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Emirates Central Cooling Systems Corporation P.J.S.C (14) The notes on pages 17 to 83 are an integral part of these consolidated financial statements. Consolidated statement of changes in equity Attributable to equity holders of the Company Notes Share capital Statutory reserve Other reserves Retained earnings Contributed capital Total equity Non- controlling interests Total AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 At 1 January 2023 1,000,000 500,000 5,836 1,444,591 82,190 3,032,617 2,125 3,034,742 Total comprehensive income for the year Profit for the year - - - 952,927 - 952,927 7,158 960,085 Other comprehensive income Other comprehensive income for the year - - 8,674 - - 8,674 - 8,674 Total comprehensive income for the year - - 8,674 952,927 - 961,601 7,158 968,759 Transaction with owners in their capacity as owners: Non-controlling interest on acquisition of subsidiary 32 - - - - - - 157,500 157,500 Dividends declared 39 - - - (850,000) - (850,000) - (850,000) At 31 December 2023 1,000,000 500,000 14,510 1,547,518 82,190 3,144,218 166,783 3,311,001 At 1 January 2024 1,000,000 500,000 14,510 1,547,518 82,190 3,144,218 166,783 3,311,001 Total comprehensive income for the year Profit for the year - - - 896,754 - 896,754 11,481 908,235 Other comprehensive income Other comprehensive income for the year - - 4,258 - - 4,258 - 4,258 Total comprehensive income for the year - - 4,258 896,754 - 901,012 11,481 912,493 Transaction with owners in their capacity as owners: Acquisition of non-controlling interest 1 - - - 2,360 - 2,360 (2,519) (159) Dividends declared 39 - - - (850,000) - (850,000) - (850,000) At 31 December 2024 1,000,000 500,000 18,768 1,596,632 82,190 3,197,590 175,745 3,373,335
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Emirates Central Cooling Systems Corporation P.J.S.C The notes on pages 17 to 83 are an integral part of these consolidated financial statements. (15) Consolidated statement of cash flows Year ended 31 December Note 2024 2023 AED’000 AED’000 Cash flows from operating activities Profit before tax 998,332 942,631 Adjustments for: Depreciation of property, plant and equipment 5 342,332 332,884 Depreciation of right-of-use assets 6 4,592 3,158 Amortisation of intangible assets 7 12,157 12,157 Settlement of financial assets 8 78,255 49,977 Amortisation of arrangement fee 30 3,781 2,852 Impairment charge of project cost 5 919 - Reversal of Impairment of trade receivables 11 (17,482) - Gain on modification of right-of-use assets 6 (89) (23) Loss on disposal of property, plant and equipment 33 - Provision for employees’ end of service benefits 21 8,786 7,186 Provision for impairment of slow moving and obsolete inventories 10 - 389 Interest on lease liabilities 30 230 104 Interest income earned on financial assets at amortised cost 8 (59,151) (38,711) Finance income 30 (54,027) (43,593) Interest expense on bank borrowings 30 244,128 217,877 Government grant income 20 (2,780) (2,780) Operating cash flows before changes in working capital and payment of employees’ end of service benefits 1,560,016 1,484,108 Changes in working capital: Inventories (10,059) 2,032 Trade and other receivables before advances 46,828 6,005 Due from related parties (9,255) 22,575 Trade and other payables 215,832 (692) Due to related parties 23,419 (121,314) Cash generated from operations 1,826,781 1,392,714 Payment of employees’ end of service benefits 21 (2,379) (1,123) Net cash generated from operating activities 1,824,402 1,391,591 Cash flows from investing activities Acquisition of interest in subsidiary 1 (159) (892,500) Additions to property, plant and equipment (306,781) (320,144) Short-term deposits (more than 3 months) invested (2,600) (16,200) Investment in financial assets at fair value through profit and loss (15,454) (10,000) Finance income received 52,873 42,887 Additions to Investment properties 37 - (12,786) Net cash used in investing activities (272,121) (1,208,743)
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Emirates Central Cooling Systems Corporation P.J.S.C The notes on pages 17 to 83 are an integral part of these consolidated financial statements. (16) Consolidated statement of cash flows (continued) Year ended 31 December Note 2024 2023 AED’000 AED’000 Cash flows from financing activities Proceeds from bank borrowings net of arrangement fee 4,749,358 - Repayment of bank borrowings 19 (3,750,000) - Dividends paid 39 (850,000) (850,000) Principal element of lease payments 6 (4,552) (3,176) Interest element of lease payments 6 (230) (104) Finance costs paid (299,010) (264,696) Net cash used in financing activities (154,434) (1,117,976) Net increase / (decrease) in cash and cash equivalents 1,397,847 (935,128) Cash and cash equivalents at the beginning of the year 538,780 1,473,908 Cash and cash equivalents at the end of the year 15 1,936,627 538,780 Non- cash transactions are disclosed in Note 36. Net debt reconciliation This section sets out an analysis of net debt and the movements in net debt for each of the years presented: 2024 2023 Note AED’000 AED’000 Cash and cash equivalents 15 1,936,627 538,780 Borrowings-repayable within one year 19 (2,196) - Borrowings-repayable after one year 19 (5,496,219) (4,492,438) (3,561,788) (3,953,658) Lease liabilities 6 (5,551) (4,081) Net debt (3,567,339) (3,957,739) Cash and cash equivalents 15 1,936,627 538,780 Lease liabilities 6 (5,551) (4,081) 1,931,076 534,699 Gross debt-fixed interest rates - - Gross debt-variable interest rates 19 (5,498,415) (4,492,438) (3,567,339) (3,957,739)
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (17) 1 Establishment and operations Emirates Central Cooling Systems Corporation P.J.S.C (“EMPOWER” or “the Company”), formerly Emirates Central Cooling Systems Corporation , was established on 23 November 2003 in accordance with Article 3 of Law No.10 (“the Decree”). The Company was established as a joint venture between Dubai Electricity and Water Authority (“DEWA”), which is ultimately owned by the Government of Dubai, and the Dubai Development Authority (later transferred to TECOM Investments FZ -LLC (“TECOM”) ). EMPOWER began commercial operations on 15 February 2004, and its principal activities are the provision of district cooling services and management, operation and maintenance of central cooling plants and related distribution networks. In 2009, DEWA increased its shareholding in the Company to 70% and reduced TECOM’s interest to 30%, as formalised through Decree No.3 of 2010 issued by the Rule r of Dubai. On 9 May 2022, TECOM transferred its interest of 30% to Emirates Power Investment LLC, an entity under common control through the Decree No. 19 of 2022 issued by the Ruler of Dubai. On 14 October 2022, the legal status of the Company was amended to a Public Joint Stock Company through Decree No. 22 of 2022 issued by the Ruler of Dubai. EMPOWER was listed on the Dubai Financial Market, on 15 November 2022, by listing 20% of its share capital. As a result, DEWA and Emirates Power Investment LLC’s interest was diluted to 56 .0% and 24.0% respectively. The Company’s primary office is located at Al Hudaiba Awards Building , P.O. Box 8081, Dubai, United Arab Emirates. These consolidated financial statements relate to the Company and its subsidiaries (jointly referred to as “the Group”). On 20 September 2021, the UAE Federal Decree Law No. 32 of 2021 (“Companies Law”) was issued and came into effect on 2 January 2022 which is applicable to the Company.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (18) 1 Establishment and operations (continued) The Company has the following material subsidiaries: Subsidiary Principal activities Beneficial and legal shareholding 2024 2023 Empower Insulated Pipe Systems LLC (formerly Empower Logstor LLC)- (i) Manufacturing of pre -insulated pipes, primarily for district cooling. 100% 97.0% Palm District Cooling LLC (ii) Establishing and operating district cooling projects and providing air-conditioning, ventilation and refrigeration services. 100% 99.9% Palm Utilities LLC (ii) Establishing and operating district cooling projects and providing air -conditioning, ventilator and refrigeration services. 100% 99.5% Empower FM LLC Installation of air conditioning, ventilation and purification systems, as well as repairs and maintenance. 100% 100% Empower Engineering & Consultancy LLC Consultancy services for project development. 100% 100% Empower Snow LLC Establishing and operating district cooling projects and providing air -conditioning, ventilator and refrigeration services. 100% 100% DXB CoolCo. FZCO Establishing and operating district cooling projects and providing air -conditioning, ventilator and refrigeration services. 85% 85% (i) In January 2024, EMPOWER acquired 3% minority shareholding in Empower Logstor LLC from Logstor Holding for AED 159 thousand. In July 2024, the legal name was changed to Empower Insulated Pipe Systems L.L.C. (ii) In July 2024, EMPOWER acquired additional shareholding in Palm Utilities LLC, from Utilities Management Company LLC. As a result of this transaction, the ownership of EMPOWER in Palm Utilities LLC and Palm District Cooling LLC increased to 100%. Empower Insulated Pipe Systems LLC (formerly Empower Logstor LLC) was established during the year 2007 with the Company owning a 51% share and Logstor Holding, Denmark owning the remaining 49% shareholding. In 2012, the Company increased its shareholding to 97% in Empower Insulated Pipe Systems LLC and diluted Logstor Holding, Denmark’s interest to 3%. During the year 2024, the Group purchased minority share of 3% from Logstor Holding for AED 159 thousand. During 2013, EMPOWER acquired 99.5% interest in Palm Utilities LLC (“PU”) and 99.9% interest in its subsidiary Palm District Cooling LLC (“PDC”). During 2020, the Company established two subsidiaries, namely Empower FM LLC and Empower Engineering & Consultancy LLC with a 100% shareholding in each. The principal activities of Empower FM LLC and Empower Engineering & Consultancy LLC are disclosed in the table above.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (19) 1 Establishment and operations (continued) During 202 1, the Company acquired 100% interest in Empower Snow LLC, a company providing District Cooling Services for various projects developed and owned by a Master Developer Nakheel PJSC for a purchase consideration of AED 673,900 thousand. During 2023, the Company acquired 85% interest in DXB CoolCo FZCO, a company providing District Cooling Services to Dubai Airport owned by Dubai Aviation City Corporation (“DACC”) for a purchase consideration of AED 892,500 thousand. The consolidated financial statements for the year ended 31 December 202 4 were authorised for issue on 14 February 2025. 2 Material accounting policies Material accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all of the years presented, unless otherwise stated. 2.1 Basis of preparation These consolidated financial statements have been prepared in accordance with IFRS Accounting Standards and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB) . The consolidated financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group ’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. (a) New and amended standards adopted by the Group during the year The following new and revised IFRS, which became effective for annual periods beginning or after 1 January 2024, have been adopted in these consolidated financial statements. • Classification of Liabilities as Current or Non-current and Non-current liabilities with covenants – Amendments to IAS 1; • Lease Liability in Sale and Leaseback – Amendments to IFRS 16; and • Supplier Finance Arrangements – Amendments to IAS 7 and IFRS 7. The amendments listed above did not have any material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (20) 2 Material accounting policies (continued) 2.1 Basis of preparation (continued) (b) New standards, amendments and interpretations not yet adopted by the Group Certain new accounting standards and amendments to accounting standards have been published that are not mandatory for 31 December 2024 reporting periods and have not been early adopted by the Group. Management is currently assessing the impact of these standards, and amendments on the future consolidated financial statements of the Group. • Amendments to IAS 21 - Lack of Exchangeability (effective for annual periods beginning on or after 1 January 2025). In August 2023, the IASB amended IAS 21 to help entities to determine whether a currency is exchangeable into another currency, and which spot exchange rate to use when it is not. • Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 and IFRS 7 (effective for annual periods beginning on or after 1 January 2026). On 30 May 2024, the IASB issued targeted amendments to IFRS 9 and IFRS 7 to res pond to recent questions arising in practice, and to include new requirements not only for financial institutions but also for corporate entities. • IFRS 19 Subsidiaries without Public Accountability: Disclosures (effective for annual periods beginning on or after 1 January 2027). Issued in May 2024, IFRS 19 allows for certain eligible subsidiaries of parent entities that report under IFRS Accounting Standards to apply reduced disclosure requirements. • IFRS 18 Presentation and Disclosure in Financial Statements (effective for annual periods beginning on or after 1 January 2027). IFRS 18 will replace IAS 1 Presentation of financial statements, introducing new requirements that will help to achieve comparability of the financial performance of similar entities and provide more relevant information and transparency to users. Even though IFRS 18 will not impact the recognition or measurement of items in the financial statements, its impacts on presentation and disclosure are expected to be pervasive, in particular those related to the statement of financial performance and providing management -defined performance measures within the financial statements. Management is currently assessing the detailed implications of applying the new standard on the group’s consolidated financial statements.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (21) 2 Material accounting policies (continued) 2.1 Basis of preparation (continued) 2.2 Consolidation (a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured in itially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition -by-acquisition basis, either at fair value or at the non -controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (22) 2 Material accounting policies (continued) 2.2 Consolidation (continued) (a) Subsidiaries (continued) Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with I FRS 9 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re -measured, and its subsequent settlement is accounted for within equity. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies. (b) Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (c) Joint arrangements The Group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventu res are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post -acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further los ses, unless it has incurred obligations or made payments on behalf of the joint ventures. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (23) 2 Material accounting policies (continued) 2.3 Property, plant, and equipment Property, plant and equipment are stated at cost less accumulated depreciation. The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items . Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial year in which they are incurred. Land is not depreciated. Depreciation on other assets is computed, using the straight -line method, at rates calculated to reduce the cost of assets to their estimated residual values over their expected useful lives as follows: Years Plant, equipment and machinery 2 to 30 Buildings 25 Furniture and fixtures 3 to 5 Leasehold improvements 3 to 4 Computer equipment 3 Vehicles 3 to 5 The asset’s residual values and useful lives are reviewed and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within profit and loss in the consolidated statement of comprehensive income. Capital work in progress is stated at cost. When commissioned, capital work in progress is transferred to property, plant and equipment and depreciated in accordance with the Group’s policies.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (24) 2 Material accounting policies (continued) 2.4 Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s r ecoverable amount is the higher of an asset’s or cash -generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transaction s are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations cover a period to the end of useful life of the assets. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the assets’ or cash -generating units’ recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated statement of profit or loss. 2.5 Financial assets (a) Classification The Group classifies its financial assets as at amortised cost, fair value through profit and loss and fair value through other comprehensive income. The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows except for financial assets which are considered as equity instrument. (i) Classification of financial assets at fair value through profit and loss A financial asset shall be measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income. However, the Group may make an irrevocable election at initial recognition for particular investments in equity instruments that would otherwise be measured at fair value through profit or loss to present subsequent changes in fair value in other comprehensive income.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (25) 2 Material accounting policies (continued) 2.5 Financial assets (continued) (a) Classification (continued) (i) Classification of financial assets at fair value through profit and loss (continued) The financial assets of the Group are as follows: Carrying amount 2024 2023 AED’000 AED’000 Trade and other receivables excluding prepayments and advances (Note 11) 182,572 215,632 Financial assets at fair value through profit and loss (Note 13) 25,466 10,000 Term deposits (Note 14) 30,264 27,500 Cash and cash equivalents (Note 15) 1,936,627 538,780 Due from related parties (Note 12) 18,076 8,821 Financial assets at amortised cost (Note 8) 1,324,787 1,343,891 Financial assets at fair value through other comprehensive income (Note 9) 55,709 54,153 (b) Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. At initial recognition, the Group measures a financial asset, including trade receivables, at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FV TPL are expensed in the consolidated statement of comprehensive income. Immediately after initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and at fair value through other comprehensive income (FVTOCI), which results in accounting loss being recognised in profit or loss when an asset is newly originated. When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the Group recognises the difference as follows: ▪ When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss. ▪ In all other cases, the difference is deferred and the time of recognition of deferred day one profit or loss is determined individually. It is either amortised over life of the instrument, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (26) 2 Material accounting policies (continued) 2.5 Financial assets (continued) (c) Subsequent measurement (i) Debt instruments Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments: • Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and profit are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and i s not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Profit income from these financial assets, if any, is included in finance income using the effective profit rate method. • Fair value through other comprehensive income (FV TOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and profit, are measured at fair value through other comprehensive income (FV TOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, profit income, if any and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Profit income, if any, from these financial assets is included in finan ce income using the effective profit rate method. • Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognised in the statement of comprehensive income and presented net in the statement of comprehensive income within other gains/(losses) in the year in which it arises. Profit income, if any, from these financial assets is recognised in profit and loss. (ii) Equity instruments The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in the statement of comprehensive income as other income when the Group’s right to receive payments is established. Changes in the fair value of financial assets at FVTPL are recognised in other income/(losses) in the consolidated statement of comprehensive income, as applicable.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (27) 2 Material accounting policies (continued) 2.5 Financial assets (continued) (c) Subsequent measurement (continued) (ii) Equity instruments (continued) Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value. (iii) Impairment The Group assesses on a forward -looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk and is computed based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. As trade receivables held by the Group have short credit period (i.e. tenor less than or equal to 12 months and does not comprise significant financing component), the Group applies simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised for receivables. The Group monitors all financial assets and financial guarantee contracts that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. In assessing whether the credit risk on a financial instrument has increased significantly since initial reco gnition, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Group’s historical e xperience and expert credit assessment including forward -looking information. For financial assets at amortised cost, at the end of each year the Group applies a three stage impairment approach to measure the expected credit losses (ECL). The ECL three stage impairment is based on the change in the credit quality of financial assets since initial recognition. If, at the reporting date, the credit risk of non -impaired financial instruments has not increased significantly since initial recognition, these financial instruments are classified in Stage 1, and an allowance for credit losses that is measured, at each reporting date, at an amount equal to 12 -month expected credit losses is recorded. When there is a significant increase in credit ris k since initial recognition, these non -impaired financial instruments are migrated to Stage 2, and an allowance for credit losses that is measured, at each reporting date, at an amount equal to lifetime expected credit losses is recorded. In subsequent reporting periods, if the credit risk of the financial instrument improves such that there is no longer a significant increase in credit risk since initial recognition, the ECL model requires reverting to Stage 1 (i.e. recognition of 12-month expected credit losses).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (28) 2 Material accounting policies (continued) 2.5 Financial assets (continued) (c) Subsequent measurement (continued) (iii) Impairment (continued) When one or more events that have a detrimental impact on the estimated future cash flows of a financial asset have occurred, the financial asset is considered credit-impaired and is migrated to Stage 3, and an allowance for credit losses equal to lifetime expected losses continues to be recorded or the financial asset is written off. The profit income, if any, is calculated on the gross carrying amount for financial assets in Stages 1 and 2 and on the net carrying amount for financial assets in Stage 3. (iv) Significant increase in credit risk In assessing whether the credit risk on its financial instrument has increased significantly since initial recognition, the Group compares the probability of a default occurring on the financial instrument as at the reporting date with the probability of a de fault occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered includes the future prospects of the industries in which the Group’s debtors operate. In assessing whether the credit risk on its financial instrument has increased significantly since initial recognition, the Group compares the probability of a default occurring on the financial instrument as at the reporting date with the probability of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered includes the future prospects of the industries in which the Group’s debtors operate. The Group’s ECL model continues to be sensitive to macroeconomic variables and the Group continues to reassess its position. (v) Definition of default The definition of default used by the Group to measure ECLs and transfer financial instruments between stages is consistent with the definition of default used for internal credit risk management purposes. The Group considers a financial asset to be credit -impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The Group considers the customer to be in default if the outstanding balance is 90 days past due.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (29) 2 Material accounting policies (continued) 2.5 Financial assets (continued) (c) Subsequent measurement (continued) (vi) Write-off policy The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, and all the efforts for collection of the receivables are exhausted. Financial assets written off may still be subject t o enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss. (vii) Measurement and recognition of expected credit losses The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given defaul t is based on historical data adjusted by forward -looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date. ECLs for all financial instruments are recognised in the consolidated statement of comprehensive income as a separate line item . In the case of debt instruments measured at amortised cost, they are presented net of the related allowance for expected credit loss on the consolidated statement of financial position. (d) Derecognition Financial assets (or, where applicable, a part of a financial asset) are derecognised when: • The rights to receive cash flows from the asset have expired; • The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement, and either: • The Group has transferred substantially all the risks and rewards of the asset; or • The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass–through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (30) 2 Material accounting policies (continued) 2.5 Financial assets (continued) (d) Derecognition (continued) (i) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amounts reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net b asis, or realise the assets and settle the liability simultaneously. 2.6 Intangible assets Rights to charge users Right to charge users acquired are recognised at fair value at acquisition date. They have a finite useful life of 30 years and are subsequently carried at cost less accumulated amortisation and impairment losses. 2.7 Inventories Inventories are stated at the lower of cost and estimated net realisable value. The cost of inventories is based on the weighted average method and includes expenditures incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. 2.8 Trade and other receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less the provision for impairment. 2.9 Cash and cash equivalents For the purpose of the consolidated statement of cash flow s, cash and cash equivalents comprise cash in hand, current accounts with banks and bank deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risks of changes in value.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (31) 2 Material accounting policies (continued) 2.10 Bank borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost . Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date. General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sa le. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed. 2.11 Government grants The Government of Dubai granted certain plots of land to the Company for use in its principal activities as set out in Note 1. The land is recorded in the books, as and when the grant is made, at the fair market value on the date of grant, carried out by an independent firm of real estate consultants. These grants are credited to deferred government grant s in the consolidated statement of financial position and are recognised as income over the useful life of the plant constructed on the land. Return of land to the Government of Dubai prior to commencement of construction of the plant is adjusted against deferred government grants in the consolidated statement of financial position. As set out in Note 1, the Company became an entity controlled by DEWA effective from 2 3 November 2009. All land plots received by the Company from the Government of Dubai after 23 November 2009 are accounted for as contributed capital in the consolidated statement of changes in equity, as DEWA is a publicly traded company with the majority of its ownership held by the Government of Dubai. 2.12 Employees end of service benefits In accordance with UAE labour law, the Group provides end of service benefits to its employees. The entitlement to these benefits is usually based upon the employees’ salary and length of service, subject to the completion of a minimum service period. (a) Short-term obligations Liabilities for wages and salaries, including non -monetary benefits and annual leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expecte d to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the statement of financial position.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (32) 2 Material accounting policies (continued) 2.12 Employees end of service benefits (continued) (b) Post employment obligations The Group provides post -employment defined benefit plan which is currently unfunded. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the e nd of the reporting period. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation. This cost is included in employee benefit expense in the statement of comprehensive income. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the statement of financial position. Changes in the present value of the defined benefit obligat ion resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. The Group has also joined the pension scheme operated by the Federal General Pension and Social Security Authority. Accordingly, contributions for eligible UAE National employees are made and recorded as employee benefit expense in the period to which employee service relates in the consolidated statement of comprehensive income, in accordance with t he provisions of Federal Law No. 7 for 1999 relating to Pension and Social Security Law. The Group has no further payment obligation once the contribution has been made.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (33) 2 Material accounting policies (continued) 2.13 Trade payables and provisions Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business , if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a rate that reflects current market assessments of the time value of money and risks specific to the obligation. Increases in provisions due to the passage of time are recognised as interest expense. Security deposits from customers are received as collateral against their dues for the charges levied for district cooling services provided. These are payable immediately on the termination of services or closure of the customer account on final settlement. Accordingly, it has been considered as current liability and part of the Trade and other payables. 2.14 Leases The Group’s leasing activities includes lease of equipment and building lease for period of 15 years and 1 year respectively. At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: • the contract involved the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substi tution right, then the asset is not identified; • the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (34) 2 Material accounting policies (continued) 2.14 Leases (continued) • the Group has the right to direct the use of the asset. The Group has the right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where all the decisions about how and for what purpose the asset is used are predetermined, the Group has the right to direct the use of the asset if either: - the Group has the right to operate the asset; or - the Group designed the asset in a way that predetermines how and for what purpose it will be used. At the inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. (a) As a lessee The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right -of-use asset is subsequently depreciated using the straight -line method from the commencement date to the earlier of the end of the useful life of the right -of-use asset or the end of the lease term. The estimated useful lives of right -of-use assets are determined on the same basis as those of property , plant and equipment. In addition, right -of-use asset s are periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liabilities. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its prevailing incremental borrowing rate (at the time of contract signing or renewal date) as the discounted rate. Lease payments included in the measurement of the lease liability comprise: - fixed payments, including in-substance fixed payments; - variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - amounts expected to be payable under a residual value guarantee; and - the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (35) 2 Material accounting policies (continued) 2.14 Leases (continued) (a) As a lessee (continued) The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will exercise a purchase, extension or terminate option. Lease liabilities are subsequently increased by the finance costs on the lease liabilities and decreased by lease payments made. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balan ce of the liability for each period. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the consolidated statement of comprehensive income if the carrying amount of the right-of-use asset has been reduced to zero. (b) Short-term leases and leases of low-value assets The Group has elected not to recognise right -of-use assets and lease liabilities f or short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (c) As a lessor When the Group acts as a lessor, it determines at the lease commencement whether each lease is a finance lease or an operating lease. To classify each lease , the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risk and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease . If not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset. When assets are leased out under an operating lease, the asset is included in the consolidated statement of financial position based on the nature of the asset. Lease income is recognised over the term of the lease on a straight -line basis. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘Revenue’.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (36) 2 Material accounting policies (continued) 2.15 Foreign currency translation (a) Functional and presentation currency Items included in the consolidated financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in United Arab Emirates Dirha ms (“AED”), which is the functional currency of the Company and its subsidiaries, and the Group’s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss, and translation di fferences on non -monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income. 2.16 Revenue recognition The Group recognises revenue from contracts with customers based on a five step model as set out in IFRS 15: Step 1. Identify the contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met. Step 2. Identify the performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer. Step 3. Determine the transaction price: The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. Step 4. Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Group will allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group expects to be entitled in exchange for satisfying each performance obligation. Step 5. Recognise revenue when (or as) the Group satisfies a performance obligation.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (37) 2 Material accounting policies (continued) 2.16 Revenue recognition (continued) The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met: (1) The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; or (2) The Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (3) The Group’s performance does not create an asset with an alternative use to the Group and the entity has an enforceable right to payment for performance completed to date. For performance obligations where one of the above conditions are not met, revenue is recognised at the point in time at which the performance obligation is satisfied. Revenue comprises the fair value of consideration received or receivable for the sales of goods and services in the ordinary course of the Group's activities and is shown net of discounts and allowances. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group's activities, as described overleaf: (a) District cooling services Demand and consumption charges revenue comprises of available capacity and variable output provided to customers and is recognised when services are provided. Energy transfer station (ETS) service charges relates to services provided for ETS at customers’ buildings and are recognised at the time services are rendered. Connection charges revenue relates to connecting the individual customer units and is recognised over the period of providing district cooling services. Other revenue comprises services that are recognised as and when services are rendered. (b) Pre-insulated pipes Revenue from the sale of pre-insulated pipes is recognised when goods are sold. 2.17 Interest income Interest income on financial assets at amortised cost and financial assets at FV TOCI is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit impaired financial assets, the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of loss allowance). Interest income is presented as finance income where it is earned from financial assets that are held for cash management purposes. Interest income from financial assets at FVTPL is included in the net fair value gains/(losses) on these assets.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (38) 2 Material accounting policies (continued) 2.18 Share Capital Ordinary shares are classified as equity. 2.19 Dividends The Group recognises a liability to make cash distributions to equity holders of the Company when the distribution is authorised. As per the laws and regulation applicable in UAE, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. 2.20 Earnings per share The Group presents basic earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit/(loss) attributable to the ordinary shareholders of the Group by the weighted average numbers of ordinary shares outstanding during the year. Diluted EPS is calculated by adjusting the weighted average number of equity shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group does not have any dilutive potential ordinary shares. 2.21 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the G roup's other components. All operating segm ents operating results are reviewed regularly by the G roup's Chief Operating Decision Maker (“CODM”) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. The Group has determined that the Board of Directors, are the chief operating decision-makers as per the requirements of IFRS 8 Operating Segments. 2.22 Investment properties Investment properties comprise building under construction held with the intention to earn rentals or for capital appreciation or both. Investment properties are stated at cost net of accumulated depreciation and/or accumulated impairment losses. Cost is defined either as cost of construction/acquisition or deemed cost, being the fair value determined by the experienced valuer at the date of recognition of the asset within invest ment properties, less accumulated depreciation and/or impairment losses. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is in accordance with the policy stated under property, plan t and equipment at the date of change in use. If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (39) 2 Material accounting policies (continued) 2.22 Investment properties (continued) When the development of investment property commences, it is classified under capital work- in-progress until development is complete, at which time it is transferred to the respective category and depreciated using the straight - line method at rates calculated to reduce the cost of assets to their estimated residual values over their expected useful lives. Land is not depreciated. Expenditure towards preparation of land for development is added to land value. Capital work-in-progress is stated at cost less any impairment in value. It includes construction, administrative, borrowing costs and other costs directly attributable to the development of the project. At reporting date, the carrying value of capital work-in-progress is allocated to property, plant and equipment, investment properties, based on their determined use. 2.23 Current and deferred income tax Income taxes have been provided for in the consolidated financial statements in accordance with legislation enacted or substantively enacted by the end of the reporting period. The income tax charge / (credit) comprises current tax and deferred tax and is r ecognised in profit or loss for the year, except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity. Taxable profits or losses are based on estimates if the consolidated financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within operating expenses. Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordanc e with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects ne ither accounting nor taxable profit and at the time of the transaction, does not give rise to equal taxable and deductible temporary differences. Deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill, and su bsequently for goodwill which is not deductible for tax purposes. Deferred taxes are recorded on temporary differences arising after initial recognition of goodwill, including those arising on initial introduction of the tax law in the UAE. Deferred tax ba lances are measured at tax rates enacted or substantively enacted at the end of the reporting period, which are expected to apply to the period when the temporary differences will reverse or the tax loss carry forwards will be utilised.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (40) 2 Material accounting policies (continued) 2.23 Current and deferred income tax (continued) Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that the temporary difference will reverse in the future and there is sufficient future taxable profit available agains t which the deductions can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from subsidiaries or on gains upon their disposal. The Group does not recognise deferred tax liabilities on such temporary differences except to the extent t hat management expects the temporary differences to reverse in the foreseeable future. 3 Financial risk management 3.1 Financial risk factors The Group’s activities expose it to a variety of financial risks including the effects of changes in market risk (including foreign exchange risk, price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. The G roup's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out by the management under policies approved by the Board of Directors. This note presents information about the G roup's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the G roup's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board of Directors is responsible for developing and monitoring the Group's risk management policies. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to r eflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (41) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (a) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Financial instruments affected by market risk include bank borrowings, term deposits, financial assets at fair value through other comprehensive income, financial assets at fair value through profit and loss and lease liabilities. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Group’s exposure to market risk arises from: (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency. The Group does not have any significant foreign currency exposure, as majority of the transactions are denominated in AED or currencies pegged to AED. (ii) Price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all the instruments traded in the market. The Group’s exposure to equity securities price risk arises from investments held by the Group and classified in the balance sheet either as at fair value through other comprehensive income (“FVTOCI”) or at fair value through profit or loss (“FVTPL”). To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group. The Group’s investment in FVTOCI is publicly traded in Nasdaq. The Group has no significant exposure to price risk on FVTPL as it is based on fixed price index. Sensitivity The following table summarises the impact of increases/decreases of the Nasdaq index on the group’s post-tax profit for the period. The analysis is based on the assumption that the index had increased by 1% or decreased by 1%, with all other variables held constant, and that all of the Group’s financial instruments moved in line with the index. 2024 2023 AED’000 AED’000 Nasdaq index-increase 1% 548 539 Nasdaq index -decrease 1% (548) (539)
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (42) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (a) Market risk (continued) (ii) Price risk (continued) Amounts recognised in profit or loss and other comprehensive income The amounts recognised in profit or loss and other comprehensive income in relation to the investment held at fair value through other comprehensive income by the Group is disclosed in note 9. (iii) Cash flow and fair value interest rate risk The Group is exposed to interest rate risk on its interest bearing assets and liabilities (borrowings and lease liabilities). The Group’s main interest rate risk arises from borrowings with variable rates as all borrowings of the Group are variable which expose the Group to cash flow interest rate risk. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its consolidated statement of financial position and cash flows. Interest rates may increase as a result of such changes, but may reduce or create losses in the event that unexpected movements arise. Manag ement monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken. The Group does not hedge its exposure to interest rate risk. At 31 December 2024, if interest rates on borrowings had been 1% higher/lower with all other variables held constant, profit for the year would have been AED 38,677 thousand (2023: AED 37,864 thousand) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings. The exposure of the Group’s borrowing to interest rate changes and the contractual re -pricing dates of the interest rate borrowings at the end of the reporting period are as follows: 2024 2023 AED’000 AED’000 Interest rate – re-pricing dates: 3 months or less 5,498,415 4,492,438 Further, at 31 December 2024, if interest rates on lease liability had been 1% higher/lower with all other variables held constant, post -tax profit for the year ended 31 December 2024 would have been lower by AED 36 thousand (2023: AED 23 thousand) mainly as a result of higher interest expense and would have been higher by AED 36 thousand (2023: AED 24 thousand) mainly as a result of lower interest expense.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (43) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk The Group has seven types of financials assets which are exposed to credit risk: • cash at bank and short term bank deposits • trade receivables • due from related parties • financial assets at amortised cost • financial assets at fair value through other comprehensive income (FVTOCI) • financial assets at fair value through profit or loss (FVTPL) • all other financial assets Deposits for district cooling services are obtained from customers before the provision of any services, which are held as security in order to mitigate credit risk in case of default by customers. (i) Risk management Credit risk is managed on a group basis. For banks and financial institutions, only independently rated parties with a good rating are accepted. For trade receivables and due from related parties, if customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and othe r factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The compliance with credit limits by customers is regularly monitored by the legal department. The group’s investments in equity instruments are considered to be low risk investments. The credit ratings of the investments are monitored for credit deterioration. (ii) Financial assets at amortised cost During 2021, the Group recognised a financial asset through the acquisition of Empower Snow LLC from Nakheel PJSC, a related party. The financial asset derives from the minimum demand load commitment by Nakheel PJSC in the signed Master Concession Agreement. During 2023, the Group recorded a financial asset which represents receivable from DACC (grantor) under IFRIC 12 as a result of acquisition of DXB Cool (Note 8). The table overleaf discloses the changes in the credit loss allowance and gross carrying amount for the financial asset between the beginning and the end of the reporting period:
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (44) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) (ii) Financial assets at amortised cost (continued) Amount in’AED'000 Item Credit loss allowance Gross carrying value Stage 1 (12 months ECL) Stage 2 (Lifetime ECL for SICR) Stage 3 (Lifetime ECL for credit impaired) Stage 1 (12 months ECL) Stage 2 (Lifetime ECL for SICR) Stage 3 (Lifetime ECL for credit impaired) Financial asset at amortised cost At 1 January 2023 - - - 305,157 - - Movements with impact on credit loss allowance charge for the year - - - - - - New originated or purchased - - - 1,050,000 - - Total impact with impact on credit loss charge during the year - - - 1,355,157 - - Repayment during the year - - - (49,977) - - Unwinding of interest income during the year - - - 38,711 - - As 31 December 2023 - - - 1,343,891 - - Financial asset at amortised cost At 1 January 2024 - - - 1,343,891 - - Movements with impact on credit loss allowance charge for the year - - - - - New originated or purchased - - - - - - Total impact with impact on credit loss charge during the year - - - 1,343,891 - - Repayment during the year - - - (78,255) - - Unwinding of interest income during the year - - - 59,151 - - As 31 December 2024 - - - 1,324,787 - -
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (45) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) Credit risk grading For measuring credit risk and grading financial instruments by the amount of credit risk, the Group applies an Internal Risk -Based rating system. Internal credit ratings are mapped on an internally defined master scale with a specified range of historical loss rate as disclosed in the table below: Grade Risk rating Definition Grade 1 1-12 Low risk Grade 2 13-17 Satisfactory risk Grade 3 18-20 High risk Grade 4 21-25 Watch list Grade 5 50,60,70,80 Impaired The Group considers the credit quality of the balance to be low risk due to Nakheel PJSC and DACC being government entities. While the balance is subject to impairment requirement, the identified impairment loss was immaterial. Trade receivables The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables and unearned revenue s have been grouped based on shared risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2024 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The expected credit loss on trade receivables is disclosed in Note 11.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (46) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) Cash at bank and short-term bank deposits Source 2024 2023 AED’000 AED’000 A Moody’s - 25 A+ Fitch 135,847 40,220 Ba1 Moody’s 1,022,848 10,245 Ba2 Moody’s 6 6 Baa1 Moody’s 20,317 11,923 Baa2 Moody’s 188,657 9,218 Baa3 Moody’s 566,261 462,241 BBB+ Fitch 2,687 4,860 Caa2 Moody’s 4 - Caa3 Moody’s - 42 1,936,627 538,780 The Group seeks to limit its credit risk to banks by only dealing with reputable banks, and independently rated parties with a minimum of investment grade ratings are accepted . No significant impairment provision was required on cash and cash equivalents as credit risk was considered minimal. Financial assets at fair value through profit and loss and fair value through other comprehensive income Financial assets at FVTPL and FVTOCI are considered to have low credit risk, and the loss allowance recognised during the period was therefore limited to 12 months’ expected losses. Management considers low credit risk for these investments as they are held with reputable institutions. All other financial assets For all other financial assets, the Group recognises expected credit loss when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantl y since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12 months ECL. The assessment of whether ECL should be recognised is based on significant increases in the likelihood or risk of a defaul t occurring since initial recognition instead of an evidence of a financial asset being credit-impaired at the end of the reporting period or an actual default. No impairment provision was required on other financial assets as credit risk was considered minimal.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (47) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) Due from related parties While due from related parties are also subject to the impairment requirement of IFRS 9, the identified impairment loss was immaterial. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. Cash flow forecasting is performed by the management which monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance and compliance with internal ratio targets. The table overleaf summarises the Group’s financial liabilities into the relevant maturity groupings based on the remaining contractual maturity period at the reporting date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within twelve mon ths equal their carrying amounts, as the ultimate amounts to be realised is not significantly different from the carrying amounts.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (48) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk (continued) Carrying amount Total contractual cash flows Less than 1 year Between 1 to 5 years More than 5 years AED’000 AED’000 AED’000 AED’000 AED’000 At 31 December 2024 Bank borrowings (including interest) (Note 19) 5,498,415 6,248,610 273,516 5,975,094 - Trade and other payables (excluding deferred revenues and including non- current retention payable) (Note 22) 1,173,732 1,173,732 1,173,732 - - Current tax liabilities (Note 28) 88,953 88,953 88,953 - - Lease liabilities (including interest) (Note 6) 5,551 5,717 5,556 161 - Due to related parties (Note 12) 159,372 159,372 159,372 - - 6,926,023 7,676,384 1,701,129 5,975,255 -
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (49) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk (continued) Carrying amount Total contractual cash flows Less than 1 year Between 1 to 5 years More than 5 years AED’000 AED’000 AED’000 AED’000 AED’000 At 31 December 2023 Bank borrowings (including interest) (Note 19) 4,492,438 5,191,643 272,142 4,919,501 - Trade and other payables (excluding deferred revenues and including non- current retention payable) (Note 22) 1,079,507 1,079,507 1,079,507 - - Lease liabilities (including interest) (Note 6) 4,081 4,300 3,638 418 244 Due to related parties (Note 12) 135,953 135,953 135,953 - - 5,711,979 6,411,403 1,491,240 4,919,919 244 During 2022, the Group obtained a bank loan of AED 5,500,000 thousand which was partially refinanced during the year 2024 and disclosed in Note 19. There has been no other change in the contractual undiscounted cash outflows for financial liabilities during the year. Net cash generated from operating activities has increased by AED 432,811 thousand (2023: decreased by AED 33,045 thousand) from AED 1,391,591 thousand for the year 2023 to AED 1,824,402 thousand for the year. 3.2 Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for the other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by the total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (50) 3 Financial risk management (continued) 3.2 Capital risk management (continued) The gearing ratios as at 31 December 2024 and 31 December 2023 were as follows: 2024 2023 AED’000 AED’000 Total borrowings (Note 19) 5,498,415 4,492,438 Less: cash and cash equivalents (Note 15) (1,936,627) (538,780) Net debt 3,561,788 3,953,658 Total equity 3,373,335 3,311,001 Total capital 6,935,123 7,264,659 Gearing ratio 51.36% 54.42% The Group manages the risk by closely monitoring the gearing ratio and by restricting the dividend pay-out if required. 3.3 Fair value estimation As at 31 December 2024 and 2023, the fair values of the Group’s financial instruments are estimated to approximate their carrying values since the financial instruments are short term in nature, carry interest rates which are based on prevailing market interest rates and are expected to be realised at their current carrying values within twelve months from the date of the consolidated statement of financial position. The fair values of the non -current financial liabilities are estimated to approximate their carrying values as these carry interest rates which are based on prevailing market interest rates. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk. When measuring the fair value of an asset or liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: - Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. - Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). - Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (51) 4 Critical accounting estimates and judgments Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements 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. (a) Impairment of non-financial assets The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the asset’s recoverable amount is estimated in order to determine the extent of impairment loss, if any. Impairment losses are charged to the statement of comprehensive income. The impairment provisions are determined as the difference between the carrying value of these assets (before impairment charge) and the recoverable amount. The recoverable amount is determined as the higher of “value-in-use” calculations, using pre-tax cash flow projections as approved by the management or fair value less cost to sell. An impairment charge of AED 919 thousand related to project cost (non -financial asset) has been recognised during the year ended 31 December 2024 (2023: Nil), following management’s impairment review. (b) Useful lives of property, plant and equipment The Group determines the estimated useful lives of its property, plant and equipment for calculating depreciation / amortisation. This estimate is determined after considering the expected usage of the asset or physical wear and tear. The Group reviews the residual value and useful lives annually and future depreciation charge would be adjusted where the Group believes the useful lives differ from previous estimates. (c) Acquisition of DXB COOLCO FZCO During the year ended 31 December 2023, EMPOWER entered into an agreement with DACC to acquire 85% of DXB Cool. The purpose of DXB Cool is to provide district cooling services to Dubai Airports Corporation (“DAC”), fully managed by EMPOWER. Although certain foundation documents with respect to DXB Cool provide the second shareholder (DACC) with certain decision-making rights, which are deemed to be protective rights given the strategic nature of the transaction and its importance to the Government of Dubai, the management assessed that based on provisions in the foundation documents, EMPOWER has adequate rights to make strategic, operational and financial decisions unilaterally. On that basis, the management concluded that EMPOWER has control over DXB Cool.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (52) 5 Property, plant and equipment Land Plant, equipment and machinery Buildings Furniture and fixtures Leasehold improvements Computer equipment Vehicles Capital work-in- progress Total AED’000 AED’000 AED’000 AED’000 AED’000 AED ‘000 AED’000 AED’000 AED’000 Cost At 1 January 2023 432,364 8,780,427 70,709 18,350 11,890 42,421 8,566 393,368 9,758,095 Additions - 5 - 766 - 59 305 274,490 275,625 Reversal of accrual - (1,865) - - - - - - (1,865) Transfers - 410,273 - 1,602 565 2,465 3,121 (418,026) - Disposals and write offs - (26,577) - (26) - (5) - - (26,608) At 31 December 2023 432,364 9,162,263 70,709 20,692 12,455 44,940 11,992 249,832 10,005,247 Additions - - - 1,411 170 1,769 557 432,092 435,999 Transfers - 309,301 - - - 1,213 - (310,514) - Transfer to Investment properties (Note 37) - - - - - - - (32,370) (32,370) Disposals and write offs - (11,911) - (25) - - (446) - (12,382) At 31 December 2024 432,364 9,459,653 70,709 22,078 12,625 47,922 12,103 339,040 10,396,494 During 2022, the Group returned 11 plots of land to a related party, which were granted in previous years for the purpose of constru cting the district cooling plants. Accordingly, the carrying amount of AED 59,382 thousand was reversed from property, plant and equipment and the corresponding deferred government grant (Note 20). District cooling assets with a net book value of AED 307,112 thousand are developed on some of these plots of land. Management signed a Master Land Agreement and Exclusivity and Framework Agreement in 2022 with the related party granting the Group unlimited access over 8 plots. The Master Land Agreement refers to a separate lease agreement which is yet to be executed between the Group and the related party over these plots on fair and reasonable terms, for a nominal value. The term of such lease agreements will be for a period no shorter than the term remaining under the master development agreement or the period as agreed in the relevant lease agreements and that EMPOWER will continue to have uninterrupted and unencumbered use of the plots until the relevant lease agreements are entered into. Capital work-in-progress balances include costs of constructing district cooling plants and networks pertaining to various projects. During the year 2024, the transfer to plant, equipment and machinery from capital work in progress represents additions mainly to district cooling projects.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (53) 5 Property, plant and equipment (continued) Land Plant, equipment and machinery Buildings Furniture and fixtures Leasehold improvements Computer equipment Vehicles Capital work-in- progress Total AED’000 AED’000 AED’000 AED’000 AED’000 AED ‘000 AED’000 AED’000 AED’000 Accumulated depreciation and impairment At 1 January 2023 - 2,645,559 31,760 16,838 10,879 36,187 5,839 17,094 2,764,156 Charge for the year - 324,474 2,785 1,410 900 2,359 956 - 332,884 Disposals and write offs - (26,577) - (26) - (5) - - (26,608) At 31 December 2023 - 2,943,456 34,545 18,222 11,779 38,541 6,795 17,094 3,070,432 Charge for the year - 333,610 2,785 1,995 258 2,207 1,477 - 342,332 Disposals and write offs - (11,911) - (25) - - (413) - (12,349) Impairment charge for the year - - - - - - - 919 919 At 31 December 2024 - 3,265,155 37,330 20,192 12,037 40,748 7,859 18,013 3,401,334 Net book amount 31 December 2024 432,364 6,194,498 33,379 1,886 588 7,174 4,244 321,027 6,995,160 31 December 2023 432,364 6,218,807 36,164 2,470 676 6,399 5,197 232,738 6,934,815 Depreciation expense of AED 333,610 thousand (2023: AED 324,474 thousand) has been charged to ‘cost of sales’ (Note 25) and AED 8,722 thousand (2023: AED 8,410 thousand) to ‘general and administrative expenses’ (Note 26).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (54) 6 Right-of-use assets and lease liabilities The Group primarily enters into equipment leases in relation to semi-permanent plants leased from DEWA for a term of 15 years (with an extension option ), a head office and labour accommodation lease for a term of 1 year only. The new head office building (under construction) is anticipated to be ready before the end of 2025. Equipment Buildings Total AED’000 AED’000 AED’000 Cost At 1 January 2023 1,730 9,951 11,681 Additions - 4,284 4,284 Modification of right-of-use assets* (551) - (551) At 31 December 2023 1,179 14,235 15,414 Additions 2,650 4,036 6,686 Modification of right-of-use assets* (1,177) - (1,177) At 31 December 2024 2,652 18,271 20,923 Accumulated depreciation At 1 January 2023 924 7,814 8,738 Charge for the year 154 3,004 3,158 Modification of right-of-use assets* (476) - (476) At 31 December 2023 602 10,818 11,420 Charge for the year 1,174 3,418 4,592 Modification of right-of-use assets* (602) - (602) At 31 December 2024 1,174 14,236 15,410 Net book amount 31 December 2024 1,478 4,035 5,513 31 December 2023 577 3,417 3,994
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (55) 6 Right-of-use assets and lease liabilities (continued) The Group recognised lease liabilities as follows: 2024 2023 AED’000 AED’000 At 1 January 4,081 3,071 Additions during the year 6,686 4,284 Interest on lease liabilities 230 104 Remeasurement of lease liabilities* (664) (98) Paid during the year (4,782) (3,280) At 31 December 5,551 4,081 Less: current portion (5,392) (3,497) Non-current portion 159 584 *During the year, the Group terminated certain lease agreements with DEWA. As a result, the Group accounted for the modification of the lease and the corresponding right-of-use asset and lease liability were remeasured. The gain arising from the modification of lease amounting to AED 89 thousand (2023: AED 23 thousand) was recognised in the consolidated statement of comprehensive income. Interest expense included in finance costs amounted to AED 230 thousand (2023: AED 104 thousand) (Note 30). There were no expenses relating to variable lease payments. T he total cash outflows for leases , including finance cost s, during the year amounted to AED 4,782 thousand (2023: AED 3,280 thousand). The expenses related to short-term leases and leases of low -value assets that are included in general and administrative expenses are as follows: 2024 2023 AED’000 AED’000 Expense relating to short-term leases (Note 26) 504 593 7 Intangible assets 2024 2023 AED’000 AED’000 At 1 January 339,982 352,139 Amortised during the year (Note 25) (12,157) (12,157) At 31 December 327,825 339,982 Intangible assets of the Group represent rights to charge users that have been acquired and recognised at fair value as of the acquisition date. These assets have a useful life of 30 years.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (56) 8 Financial assets at amortised cost 2024 2023 AED’000 AED’000 At 1 January 1,343,891 305,157 Additions during the year (Note 32) - 1,050,000 Interest earned during the year 59,151 38,711 Settlement during the year (78,255) (49,977) At 31 December 1,324,787 1,343,891 Less: current portion (19,949) (19,105) Non-current portion 1,304,838 1,324,786 The opening balance of the financial assets at amortised cost on 1 January 2023 represents receivable from Nakheel PJSC (Note 1 2) in relation to acquisition of Empower Snow LLC (formerly Snow LLC) during 2021. Additions during the previous year represent financial asset receivable from DACC (grantor) under IFRIC 12 as a result of the acquisition of DXB Cool (Note 32). The financial asset is initially recognised at fair value and subsequently measured at amortised cost. The fair value of the financial asset is the transaction price which is agreed between the market participants through a competitive bidding process. The fair value is determined using the discounted cash flow techniques, the inputs into the valuat ion techniques includes contractual cash flows and interest rates. The balance of financial assets at amortised cost as above represents receivable of: (a) AED 296,600 thousand (2023: AED 301,003 thousand) from Nakheel PJSC, an entity under common control, in relation to acquisition of Empower Snow LLC (formerly Snow LLC) during 2021 and; (b) AED 1,0 28,187 thousand (2023: AED 1,042,888 thousand) from DACC, an entity under common control, in relation to acquisition of DXB Cool during 2023. The financial assets are categorised within level 3 of the fair value hierarchy which approximates its carrying value.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (57) 9 Financial assets at fair value through other comprehensive income (FVTOCI) 2024 2023 AED’000 AED’000 At 1 January 54,153 52,911 Interest accrued 643 - Gain recognised during the year 913 1,242 At 31 December 55,709 54,153 During the year, the following amounts were recognised in profit or loss and other comprehensive income: 2024 2023 AED’000 AED’000 Gain recognised in other comprehensive income 913 1,242 Interest income from equity investments held at FVTOCI recognised in profit or loss (Note 30) 3,305 3,947 The Group has invested in Tier 1 Capital Certificates (“Bonds”), which have been issued at their par value. The se Bonds are perpetual instruments and are listed. The bonds carry a non- cumulative interest of 6% per annum, payable semi-annually at the discretion of the issuer. In accordance with IFRS 9, the Group has elected to classify these Bonds as financial assets at fair value through other comprehensive income, as they are not held for trading purposes. As a result, changes in the fair value of these Bonds has been recorded in other comprehensive income. 10 Inventories 2024 2023 AED’000 AED’000 Spares and consumables for district cooling services 37,412 36,143 Pre-insulated pipes 16,766 7,976 Provision for impairment of slow moving and obsolete inventories (389) (389) 53,789 43,730 The cost of inventories recognised as expense and included in ‘cost of sales’ is AED 13,695 thousand (2023: AED 11,662 thousand) (Note 25).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (58) 11 Trade and other receivables 2024 2023 AED’000 AED’000 Trade receivables 185,829 226,508 Accrued revenues 38,313 49,488 224,142 275,996 Less: Provision for expected credit losses (57,215) (74,697) 166,927 201,299 Other financial assets at amortised cost Other receivables 15,645 14,333 Other assets Advance to contractors / suppliers 75,112 89,915 Prepayments 17,596 13,547 92,708 103,462 275,280 319,094 Other receivables includes a deposit of AED 4,490 thousand (2023: AED 4,490 thousand) receivable from DEWA (Note 12). As at 31 December 2024, the Group faced a concentration of credit risk with three customers (2023: three customers) which accounted for 21.4% (2023: 31.9%) of the trade receivables at that date. Management has recorded a provision of AED 24,278 thousand (2023: AED 32,962 thousand) against these customers. Management is of the opinion that this concentration of credit risk from customers will not result in a further loss. As at 31 December 2024, the movement in the allowance for impairment of receivables is as follows: 2024 2023 AED’000 AED’000 At 1 January 74,697 74,697 Reversal for the year (17,482) - Balance at the end of the year 57,215 74,697 The table overleaf provides a detailed analysis of the risk profile of trade receivables based on the Group's provision matrix. As the Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished between the Group's different customer base for the majority of customers.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (59) 11 Trade and other receivables (continued) As at 31 December, the aging analysis of trade receivables is as follows: Total Not yet due 0 to 30 days 31 to 90 days 91 to 120 days 121 to 180 days 181 to 365 days > 365 days 2024 Trade receivables and accrued revenue (AED '000) 224,142 38,313 69,830 30,923 11,615 8,110 13,498 51,853 Provision % 25.5% 0% 2.1% 10.6% 32.2% 47.4% 61.0% 70.6% Provision (AED'000) 57,215 - 1,498 3,276 3,742 3,842 8,232 36,625 Net trade receivables and accrued revenue (AED'000) 166,927 38,313 68,332 27,647 7,873 4,268 5,266 15,228 2023 Trade receivables and accrued revenue (AED '000) 275,996 49,488 62,269 44,561 11,595 12,679 19,379 76,025 Provision % 27.1% 0% 1.9% 11.5% 24.6% 57.9% 58.0% 61.7% Provision (AED'000) 74,697 - 1,204 5,113 2,855 7,344 11,239 46,942 Net trade receivables and accrued revenue (AED'000) 201,299 49,488 61,065 39,448 8,740 5,335 8,140 29,083 The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group holds security deposits of AED 492,212 thousand (2023: AED 456,361 thousand) (Note 22) as collateral against receivables. Other classes of trade and other receivables do not contain impaired assets.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (60) 12 Transactions and balances with related parties Related parties include the shareholders, key management personnel, subsidiaries, joint venture, directors and businesses which are controlled directly or indirectly by the shareholders or directors or over which they exercise significant management influence. The Group has availed the exemption in accordance with paragraph 25 of IAS 24 Related Party Disclosure and consider the entities (other than disclosed below) controlled by Government of Dubai as non-related. 2024 2023 Transactions with related parties AED’000 AED’000 Services rendered to entities under common control of shareholders Dubai Properties Group LLC 160,533 153,660 Nakheel PJSC 157,189 - Meraas Holding LLC 61,618 39,051 Jumeirah Group LLC 62,718 51,341 Tecom Investments FZ LLC 66,786 68,072 Global Village Dubai LLC 654 698 509,498 312,822 Acquisition of DXB Cool Dubai Aviation City Corporation (DACC) - 892,500 Dividend to shareholders Emirates Power Investment LLC* 204,000 204,000 Dubai Electricity and Water Authority PJSC 476,000 476,000 680,000 680,000 Services received from shareholder Dubai Electricity and Water Authority PJSC 1,442,388 1,277,023 Services rendered to entities under common control of Ultimate parent Dubai Airports Corporation (DAC) 258,039 107,535 Services received from entities under common control of Ultimate parent Finance cost from Emirates NBD PJSC 277,056 252,751 Key management remuneration Board of directors’ remuneration (Note 26) 5,880 7,000 Compensation of key management personnel Short term benefits 9,659 9,694 End of service benefits 520 520 10,179 10,214 *On 9 May 2022, TECOM transferred its 30% interest in the Group to Emirates Power Investment LLC, an entity under common control as detailed in Note 1.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (61) 12 Transactions and balances with related parties (continued) Balances with related parties 2024 2023 AED’000 AED’000 Due from related parties Shareholders Dubai Electricity and Water Authority PJSC - 4 Emirates Power Investment LLC - 2 - 6 Entities under common control of shareholders Jumeirah Group LLC 2,566 2,311 Meraas Holding LLC 371 602 Tecom Investments FZ LLC 140 3,762 Others 31 65 3,108 6,740 Others Dubai Airports Corporation (DAC) 14,708 2,075 Dubai Aviation City Corporation (DACC) 260 - 18,076 8,821 Due to related parties Shareholder Dubai Electricity and Water Authority PJSC 124,321 113,854 Entities under common control of shareholder Dubai Properties Group LLC 17,270 17,955 Dubai Airports Corporation (DAC) 6,869 - Nakheel PJSC 10,412 - Dubai Holding LLC - 3,708 34,551 21,663 Others 500 436 159,372 135,953 Amounts included in bank borrowings, financial assets at amortised cost, cash and cash equivalents and trade and other receivables Shareholder Dubai Electricity and Water Authority PJSC 4,490 4,490 Entities under common control of shareholder Emirates NBD PJSC 5,556,869 4,498,463 Dubai Islamic Bank 1,022,820 6,892 Emirates Islamic Bank 135,847 40,220 Dubai Aviation City Corporation (DACC) 1,028,187 1,042,888 Nakheel PJSC 296,600 301,003
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (62) 13 Financial assets at fair value through profit or loss (FVTPL) 2024 2023 AED’000 AED’000 Investment in National Bonds 25,466 10,000 14 Term deposits 2024 2023 AED’000 AED’000 Short-term bank deposits – more than 3 months 30,264 27,500 The term deposits held by the Group have original maturities of more than 3 months. These short-term bank deposits bear an effective interest rate ranging from 4.55% to 5.75% per annum (2023: 5.50% to 5.75% per annum). Term deposits are presented as cash equivalents only if they have a maturity of three months or less from the date of original maturity or are readily convertible to known amounts of cash which are subject to insignificant risk of changes in value. 15 Cash and cash equivalents 2024 2023 AED’000 AED’000 Cash at bank 394,761 168,980 Short-term bank deposits – less than 3 months 1,541,866 369,800 1,936,627 538,780 Bank balances are held with branches of local and international banks. Short-term bank deposits bear an effective interest which ranges between 3.50% to 5.45%. (2023: 3.75% to 5.45% per annum).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (63) 16 Share capital 2024 2023 AED’000 AED’000 Authorised, issued and fully paid up share capital Ordinary shares of 10,000,000 thousand of AED 0.10 each 1,000,000 1,000,000 The authorised and paid up capital of the Company as at 31 December 2024 amounted to AED 1,000,000 thousand (2023: AED 1,000,000 thousand), of which AED 560,000 thousand (2023: AED 560,000 thousand) was contributed by DEWA , AED 240,000 thousand (2023: AED 240,000 thousand) was contributed by Emirates Power Investment LLC and AED 200,000 thousand (2023: AED 200,000 thousand) by public shareholders. In accordance with Decree No. 22 of 2022 issued by the Ruler of Dubai on 14 October 2022, the share capital of the Company was structured as part of the Initial Public Offering (IPO) process as follows: Number of shares 10,000,000 thousand Par value per share AED 0.10 Capital AED 1,000,000 thousand 17 Statutory reserve In accordance with the Articles of Association of the Company and its subsidiaries, 5% of the profit for the year is required to be transferred to the statutory reserve for each entity . Such transfers are required to be made until the reserve equals 50% of the share capital in each of the subsidiaries. This reserve is not available for distribution, except in circumstances stipulated in the commercial laws applicable to each entity. The transfer of profit to the statutory reserve has been suspended as the reserve has reached 50% of the paid -up share capital in prior years. 18 Contributed capital In previous years, the Group received certain plots of land from the Government of Dubai, which were valued by an independent firm. As disclosed in Note 2.11, the value of such land, equivalent to AED 64,690 thousand, was treated as a capital contribution form the shareholders as the Company is controlled by DEWA, which is also controlled by the Government of Dubai. During the year 2020, the Group also received 2 plots of land from Meydan City Corporation, with a value of AED 17,500 thousand. The total contributed capital amounted to AED 82,190 thousand (2023: AED 82,190 thousand).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (64) 19 Bank borrowings 31 December 2024 31 December 2023 AED’000 AED’000 Term loan 2,750,000 4,500,000 Interest accrued – net 388 - Unamortised arrangement fee (3,781) (7,562) Term loan, net 2,746,607 4,492,438 Revolving credit facilities 2,750,000 - Interest accrued – net 1,808 - Revolving credit facilities, net 2,751,808 - Total Borrowings, net 5,498,415 4,492,438 Less: current portion 2,196 - Non-current portion 5,496,219 4,492,438 The movement in bank borrowings during the year: 2024 2023 AED’000 AED’000 As at 1 January 4,492,438 4,489,586 Drawdown during the year* 4,749,358 - Interest expense during the year (Note 30) 246,359 220,729 Interest capitalised during the year (Note 30) 55,489 46,819 Interest paid during the year (299,010) (267,548) Principal repayment during the year (3,750,000) - Arrangement fee charged to profit and loss 3,781 2,852 As at 31 December 5,498,415 4,492,438 *On 26 September 2024, the Group exchanged certain borrowing facilities with one of its existing lender which resulted in the following changes to the terms of the facilities: • Extension of the maturity date from 2025 to 2027. • Reduction in interest margin. • Change in the nature of the facilities from term loans to revolving facilities. Pursuant to the requirements of International Financial Reporting Standard 9, the Group assessed whether the present value of the new cash flows under the new terms is at least 10% different from the present value of the remaining cash flows of the original liability, using the original effective interest rate, based on this quantitative test the difference is less than 10%. The Group has adopted as its accounting policy to perform a qualitative assessment in addition to the quantitative test.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (65) 19 Bank borrowings (continued) Management has considered the qualitative changes (e.g. change in the nature of the facilities from term loan to revolving credit facilities, extension of term, changes in interest margin) and concluded that those changes are substantial, and as such the e xchange of the loan with the existing lender results in a new loan with substantially different terms compared to the original loan. Therefore, the arrangement was accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability, at fair value. The difference between the carrying amount of a financial liability extinguished and the consideration paid is recognised in profit or loss, together with the related costs/fees incurred amounting to AED 3,781 thousand which includes the arrangement fee in relation to previous borrowings amounting to AED 2,406 thousand. As of 31 December 2024, the Group has the following outstanding borrowing facilities; Facility Term Interest rate Amount (AED’000) RCF – Conventional 3 Years EIBOR + margin 1,375,000 RCF – Islamic 3 Years EIBOR + margin 1,375,000 Term loan A2 – Conventional 5 Years EIBOR + margin 1,375,000 Term loan B2 – Islamic 5 Years EIBOR + margin 1,375,000 Total 5,500,000 Revolving credit facilities (RCF) are classified as non -current liabilities at the end of the reporting period as the Company has a right to defer settlement of these for at least 12 months after the reporting period. The Group is under discussion with the banks to refinance Term loan A2 & B2. The maturity profile of the borrowings is as follows: 31 December 2024 31 December 2023 AED’000 AED’000 Within one year 2,196 - After one year but not more than three years 5,496,219 2,743,469 More than 3 years - 1,748,969 5,498,415 4,492,438 The change in financial covenants is not substantial and the facilities are guaranteed by the Company and Palm District Cooling LLC. The undrawn term loan facilities are Nil as at 31 December 2024 (2023: AED 1,000,000 thousand) at a floating rate linked to EIBOR plus margin. The Group had no outstanding balance in bank guarantees and letters of credits as at 31 December 2024 (2023: AED 3,842 thousand ) which were fully payable to Emirates NBD PJSC, a related party for the Group (Note 33).
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (66) 19 Bank borrowings (continued) The Group has the financial bank covenants to maintain net debt to tangible net worth and net debt to EBITDA. The Group has complied with its financial covenants as at reporting period end. The exposure of the Group’s borrowings to interest rate changes and the contractual repricing ranges between one to twelve months. The fair value of current borrowings equals their carrying amount, as the loans are priced based on EIBOR plus a margin. 20 Government grants Government grants received prior to 23 November 2009 are recognised as income over the useful life of the plant constructed on the granted land. The current portion represents the expected release of the government grant for the plants currently in operation and those which are expected to be completed during next year. The actual amount of release may vary due to delay in completion/commencement of the operations of these plants. 2024 2023 AED’000 AED’000 At 1 January 308,728 311,508 Released during the year (Note 29) (2,780) (2,780) At 31 December 305,948 308,728 Less: current portion (3,170) (3,170) Non-current portion 302,778 305,558 21 Provision for employees’ end of service benefits In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations as at 31 December 2024 and 2023, using the projected unit credit method, in respect of employees’ end of service benefits payable under the UAE Labour Law. Under this method, an assessment has been made of the employee’s expected service life with the Group and the expected basic salary at the date of leaving the service. Future salary increases have been estimated on a basis co nsistent with the natural progression of an employee’s salary in -line with the Group’s salary scales, past experience and market conditions.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (67) 21 Provision for employees’ end of service benefits (continued) The following tables summarise the components of net benefit expense recognised in the consolidated statement of profit or loss and other comprehensive income: 2024 2023 AED’000 AED’000 Current service cost 6,350 4,867 Interest cost 2,436 2,319 Net expense recognised in the consolidated statement of profit or loss 8,786 7,186 Actuarial gain recognised in the consolidated statement of comprehensive income (3,427) (7,432) Changes in the present value of defined benefit obligations is as follows: 2024 2023 AED’000 AED’000 At 1 January 54,666 56,035 Current service cost 6,350 4,867 Interest cost 2,436 2,319 Benefits paid during the year (2,379) (1,123) Actuarial gain recognised in the consolidated statement of comprehensive income (3,427) (7,432) At 31 December 57,646 54,666 The expected maturity analysis of undiscounted benefits plans is as follows: AED’000 Less than 12 months 1 to 5 years >5 years Total As at 31 December 2024 Defined benefits obligation 6,773 35,281 32,789 74,843 6,773 35,281 32,789 74,843 As at 31 December 2023 Defined benefits obligation 10,914 27,882 30,010 68,806 10,914 27,882 30,010 68,806 2024 2023 AED’000 AED’000 United Arab Emirates 57,646 54,666 At 31 December 57,646 54,666 Management believes that no reasonably possible change in any of the below key assumptions would have material impact on the amounts disclosed in the consolidated financial statements.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (68) 21 Provision for employees’ end of service benefits (continued) The principal assumptions used in determining the provision for end of service benefit obligations are shown below: 2024 2023 AED’000 AED’000 Discount rate per year 4.93% 4.25% Salary increase per year 3% 3% Contribution plan The amount of pension contribution made by the Group for UAE Nationals during the year is AED 5,338 thousand (2023: AED 4,686 thousand). 22 Trade and other payables 2024 2023 AED’000 AED’000 Deferred revenue 520,094 341,792 Refundable customers’ security deposits (Note 11) 492,212 456,361 Project cost accruals 277,730 240,489 Project payables 93,539 75,796 Retentions payable 91,673 87,731 Other liabilities* 218,578 219,130 Total 1,693,826 1,421,299 Less: Non-current portion retentions payable (16,189) (18,036) Current portion 1,677,637 1,403,263 *Other liabilities mainly include accrued expenses for water and electricity amounting to AED 37,967 thousand (2023: AED 36,742 thousand) which relates to a shareholder (Note 12), staff liabilities amounting to AED 50,715 thousand (2023: AED 50,080 thousand) and others. Movement in deferred revenue is as follows: 2024 2023 AED’000 AED’000 At 1 January 341,792 290,225 Billed during the year 1,397,092 1,231,736 Less: Income recognised during the year (1,218,790) (1,180,169) At 31 December 520,094 341,792
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (69) 22 Trade and other payables (continued) Terms and conditions of the financial liabilities: Trade payables and other financial liabilities are non-interest bearing and are normally settled on 60-90 day terms. Retentions payable are non -interest bearing and are normally settled in accordance with the terms of the contacts. Revenue recognised in relation to deferred revenue The following table shows how much of the revenue recognised in the current reporting period relates to carried-forward contract liabilities and how much relates to performance obligations that were satisfied in a prior year: 2024 2023 AED’000 AED’000 Revenue recognised that was included in the contract liability balance at the beginning of the period 111,142 96,787 Revenue recognised from performance obligations satisfied in previous periods - - Revenue is recognised at the point in time for connection fee to building owners at which the performance obligation is satisfied. 23 Revenue 2024 2023 AED’000 AED’000 District cooling services 3,239,722 3,017,829 Sale of pre-insulated pipes 20,767 17,374 3,260,489 3,035,203
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (70) 24 Operating segments The Group has determined that the Board of Directors, are the Chief Operating Decision- Makers (“CODM”) per the requirements of IFRS 8 Operating Segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consiste ntly with operating profit or loss in the consolidated financial statements. The Board of Directors are also provided with multiple levels of information which comprise of revenue, gross profit and net profit, aggregated for higher level components by stream. The financial accounting system of the Group is currently configured in this manner and this information is readily available. However, for decision making purposes, the Board of Directors relies mainly on the revenue and net profit information that contains lower level components. Hence, the segment information provided is primarily to the net profit level of the Group. For the Board of Directors, the Group is currently organised into two major operating and reportable segments as follows: · The ‘Chilled water’ segment constructs, owns, assembles, installs, operates and maintains cooling and conditioning systems. In addition, the segment distributes and sells chilled water for use in district cooling technologies. · The ‘Pre-insulated pipe business' segment is involved in manufacture, assemble and selling activities relating to the expansion of the Group’s chilled water business.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (71) 24 Operating segments (continued) 2024 2023 Chilled water Pre-insulated pipe Intersegment eliminations Total Chilled water Pre-insulated pipe Intersegment eliminations Total AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Revenues External revenue* 3,239,722 20,767 - 3,260,489 3,017,829 17,374 - 3,035,203 Inter-segment revenue - 28,496 (28,496) - - 37,864 (37,864) - Interest earned on financial asset 59,151 - - 59,151 38,711 - - 38,711 Total revenues 3,298,873 49,263 (28,496) 3,319,640 3,056,540 55,238 (37,864) 3,073,914 Cost of sales (1,900,515) (33,536) 16,554 (1,917,497) (1,725,862) (36,449) 21,433 (1,740,878) Gross profit 1,398,358 15,727 (11,942) 1,402,143 1,330,678 18,789 (16,431) 1,333,036 General and administrative expenses (229,303) (5,816) - (235,119) (211,927) (8,358) - (220,285) Reversal of expected credit losses 17,020 462 - 17,482 - - - Other income 6,823 1,115 - 7,938 5,872 1,248 - 7,120 Operating profit 1,192,898 11,488 (11,942) 1,192,444 1,124,623 11,679 (16,431) 1,119,871 Finance income 52,600 1,427 - 54,027 42,120 1,473 - 43,593 Finance costs (248,139) - - (248,139) (220,833) - - (220,833) Profit before tax 997,359 12,915 (11,942) 998,332 945,910 13,152 (16,431) 942,631 Income taxes (90,003) (94) - (90,097) 17,454 - - 17,454 Net profit for the year 907,356 12,821 (11,942) 908,235 963,364 13,152 (16,431) 960,085 Inter-segment transactions are eliminated on consolidation. * External revenue in clude connection charges relate d to the connection of individual customer units and is recognised over the provision period of district cooling services.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (72) 24 Operating segments (continued) Segment results include an amount of depreciation and amortisation allocated to the operating segments as follows: 2024 2023 Chilled water Pre- insulated pipe Total Chilled water Pre- insulated pipe Total AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Depreciation of property, plant & equipment (Note 5) 342,007 325 342,332 330,399 2,485 332,884 Depreciation of right-of-use asset (Note 6) 4,592 - 4,592 3,158 - 3,158 Amortisation of intangible asset (Note 7) 12,157 - 12,157 12,157 - 12,157 Total depreciation and amortisation 358,756 325 359,081 345,714 2,485 348,199 Segment assets and liabilities are as follows: 2024 2023 Chilled water Pre- insulated pipe Total Chilled water Pre- insulated pipe Total AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Segment assets 11,095,769 86,970 11,182,739 9,626,555 101,304 9,727,859 Investment in joint venture 307 - 307 307 - 307 Total assets 11,096,076 86,970 11,183,046 9,626,862 101,304 9,728,166 Total liabilities 7,795,192 14,519 7,809,711 6,403,832 13,333 6,417,165
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (73) 24 Operating segments (continued) The table below illustrates the capital expenditures added during the year: 2024 2023 Chilled water Pre- insulated pipe Total Chilled water Pre- insulated pipe Total AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Property, plant and equipment 435,979 20 435,999 275,613 12 275,625 Geographic information The following table presents certain non -current assets and revenue information relating to the Group based on geographical location of the operating units: Revenue Non-current assets 2024 2023 2024 2023 AED’000 AED’000 AED’000 AED’000 United Arab Emirates 3,258,913 3,026,127 8,823,595 8,761,136 Kuwait 1,576 9,076 - - 3,260,489 3,035,203 8,823,595 8,761,136
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (74) 25 Cost of sales 2024 2023 AED’000 AED’000 Utilities cost 1,452,212 1,285,778 Depreciation on property, plant and equipment (Note 5) 333,610 324,474 Staff costs (Note 27) 43,179 39,175 Materials (Note 10) 13,695 11,662 Amortisation of intangible assets (Note 7) 12,157 12,157 Depreciation on right-of-use assets (Note 6) 1,174 154 Impairment charge on property, plant and equipment 919 - Others * 60,551 67,478 1,917,497 1,740,878 *Others include expenses related to repairs and maintenance, spares, consumables, insurance, freight and transportation. 26 General and administrative expenses 2024 2023 AED’000 AED’000 Staff costs (Note 27) 168,958 164,454 Depreciation on property, plant and equipment (Note 5) 8,722 8,410 Directors’ remuneration (Note 12) 5,880 7,000 Advertising and marketing expenses 5,584 4,929 Communication expenses 5,382 5,350 Bank charges 4,821 5,931 Repairs & Maintenance 3,890 1,584 Software maintenance expenses 3,851 3,146 Depreciation on right-of-use assets (Note 6) 3,418 3,004 HSE equipment expenses 2,352 2,246 Business travel 2,328 1,895 Water & Electricity 2,240 1,868 Rent (Note 6) 504 593 Others 17,189 9,875 235,119 220,285
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (75) 27 Staff costs 2024 2023 AED’000 AED’000 Salaries 135,645 127,172 Staff benefits 67,706 69,271 End of service benefits (Note 21) 8,786 7,186 212,137 203,629 Staff costs have been charged to: Cost of sales (Note 25) 43,179 39,175 General and administrative expenses (Note 26) 168,958 164,454 212,137 203,629 28 Income taxes On 9 December 2022 UAE Federal Decree Law No. 47 of 2022 was published setting in place a general corporate income tax for the first time. The profit threshold of AED 375,000 at which the 9% tax will apply was set in place by Cabinet Decision No. 116 of 2022 which was published on 16 January 2023 and at this point the tax law was considered enacted and substantively enacted for accounting purposes. As a result of the enactment / s ubstantial enactment of Corporate tax, management performed assessment of deferred tax during 2023, with the help of an external consultant, for application of IAS 12 taking into consideration the cabinet decisions with respect to adjustments for temporary and permanent differences. The Group is subject to income tax on profits generated in the financial year commencing 1 January 2024, and current taxes are accounted. As of 31 December 2024, the Group has current tax liabilities of AED 88,953 thousand (2023: Nil) and deferred tax asset (net) of AED 16,228 thousand (31 December 2023: AED 17,454 thousand). (a) Component of income tax Income tax credit recorded in consolidated statement of profit or loss comprises of the following: 2024 2023 AED’000 AED’000 Current tax 88,953 - Deferred tax 1,144 (17,454) Income tax 90,097 (17,454)
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (76) 28 Income taxes (continued) (b) Reconciliation between the tax expense and prof it or loss multiplied by applicable tax rate. The income tax rate applicable to the Group’s income is 9% (2023: Nil). A reconciliation between the expected and the actual tax charge is provided below: 2024 2023 AED’000 AED’000 Profit before tax 998,332 - Profit before tax at statutory rate of 9% 89,850 - Tax effect of amounts which are not deductible / (taxable) in calculating taxable income: Entities not part of tax group 7 - Actuarial gain on Provision for employees' end of service benefits 308 - Income exempt from taxation (68) - Income tax expense 90,097 - The effective tax rate for the year 2024 8.9% (2023: Nil). (c) Deferred taxes analysed by type of temporary difference Differences between IFRS Acc ounting Standards and statutory taxation regulations in the United Arab Emirates give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences was not material to the c onsolidated financial statement. Further, AED 82 thousand of deferred tax relates to changes in fair value of financial assets at fair value through other comprehensive inco me which has been recognised in other comprehensive income in the consolidated statement of comprehensive income. 29 Other income 2024 2023 AED’000 AED’000 Government grant (Note 20) 2,780 2,780 Scrap sale 616 1,813 Rental income 470 1,290 Others 4,072 1,237 7,938 7,120
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (77) 30 Finance costs – net 2024 2023 AED’000 AED’000 Interest income on short-term bank deposits 48,690 38,085 Interest income on financial assets at FVTOCI (Note 9) 3,305 3,947 Interest income on call account with banks 1,221 1,489 Interest income on financial assets at FVTPL 811 72 Total finance income 54,027 43,593 Interest expense on bank borrowings (298,975) (264,696) Amortization of arrangement fees (3,781) (2,852) Arrangement fees paid on refinance (642) - Interest on lease liabilities (230) (104) (303,628) (267,652) Interest expenses capitalised 55,489 46,819 Total finance costs (248,139) (220,833) Finance costs – net (194,112) (177,240) Capitalised borrowing costs The capitalisation rate used to determine the amount of borrowing costs is the weighted average interest rate applicable to the entity’s general borrowings during the year of 5.993% (2023 – 5.882%). 31 Financial instruments by category The accounting policies for financial instruments have been applied to the line items below: Amortised cost 2024 2023 AED’000 AED’000 Cash and cash equivalents (Note 15) 1,936,627 538,780 Financial assets at amortised cost (Note 8) 1,324,787 1,343,891 Trade and other receivables, excluding prepayments and advance to contractors / suppliers (Note 11) 182,572 215,632 Due from related parties (Note 12) 18,076 8,821 Term deposits (Note 14) 30,264 27,500 Total 3,492,326 2,134,624
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (78) 31 Financial instruments by category (continued) Fair value through other comprehensive income (FVTOCI) 2024 2023 AED’000 AED’000 Financial assets at fair value through other comprehensive income (Note 9) 55,709 54,153 Financial assets at fair value through profit or loss (FVTPL) 2024 2023 AED’000 AED’000 Investment in National Bonds (Note 13) 25,466 10,000 2024 2023 AED’000 AED’000 Other financial liabilities at amortised cost Bank borrowings (Note 19) 5,498,415 4,492,438 Trade and other payables (excluding deferred revenues and including non-current retention payable) (Note 22) 1,173,732 1,079,507 Due to related parties (Note 12) 159,372 135,953 Lease liabilities (Note 6) 5,551 4,081 6,837,070 5,711,979 The fair values of the Group’s financial assets and liabilities are not materially different from their carrying values at the reporting date. 32 Acquisition Acquisition of DXB COOLCO FZCO On 18 May 2023, the Group entered into a sale and purchase agreement with Dubai Aviation City Corporation (‘DACC’) to acquire 85% share capital of DXB Cool for a consideration of AED 892,500 thousand. DXB Cool is a company incorporated in Dubai Airport Freezone Authority, and has a concession agreement with Dubai Aviation City Corporation (DACC) which granted it the sole and exclusive rights to operate, maintain and perform the district cooling services within the Dubai International Airport for a term of 35 years from the commencement date (5 July 2023). The transaction with DACC is accounted under IFRIC 12 ‘Service Concession Arrangements’ and DXB Cool holds a financial asset/receivable from DACC amounting to AED 1,050 ,000 thousand. In the Group’s consolidated financial statements, a financial asset of AED 1,050,000 thousand has been recorded, along with a non-controlling interest of AED 157,500 thousand, representing DACC's 15% shareholding.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (79) 32 Acquisition (continued) The financial asset will be recovered over the 35 year-period concession agreement. Further, the financial asset is initially recognised at fair value and subsequently measured at amortised cost. The fair value of the financial asset is the transaction price which is mutually agreed between the market participants through a competitive bidding process. Details of the purchase consideration, the net assets acquired at date of acquisition are as follows: 2023 AED’000 Consideration paid 892,500 Net assets acquired which represents financial asset at amortised cost (Note 8) 1,050,000 Non-controlling interests 157,500 Gain on acquisition - Non-controlling interests Set out below is summarised financial information for DXB Cool. 2024 2023 Summarised statement of financial position AED’000 AED’000 Current assets 207,473 76,593 Current liabilities 49,355 10,653 Current net assets 158,118 65,940 Non-current assets 1,013,256 1,028,898 Net assets 1,171,374 1,094,838 Accumulated NCI 175,745 164,264 2024 2023 Summarised statement of comprehensive income AED’000 AED’000 Total comprehensive income 76,540 45,090 Profit allocated to NCI 11,481 6,764 2024 2023 Summarised cash flows AED’000 AED’000 Cash flows from operating activities 113,662 57,661 Cash flows from investing activities 2,490 (547) Net increase in cash and cash equivalents 116,152 57,114
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (80) 33 Guarantees As at 31 December 2024, the Group had outstanding bank guarantee s and letters of credits amounting to AED Nil (2023: AED 3,842 thousand ), which were issued by the Group’s bankers in the normal course of business. 34 Commitments Capital commitments As at 31 December 2024, the Group ha d project commitments of AED 726,784 thousand (2023: AED 687,341 thousand ) for projects -in-progress. These commitments represent the value of contracts issued as at 31 December 2024 and as at 31 December 2023, net of invoices recorded and accruals made as at that date. 35 Earnings per share 2024 2023 AED’000 AED’000 Profit attributable to the ordinary equity holders of the Company 896,754 952,927 Weighted average number of ordinary shares used as a denominator in calculating basic earnings per share 10,000,000 10,000,000 Basic and diluted earnings per share 0.090 0.095 36 Non-cash transactions 2024 2023 AED’000 AED’000 Additions of right-of-use-assets (Note 6) 4,036 4,284 37 Investment properties 2024 2023 AED’000 AED’000 Land and building Land and building At 1 January 85,645 72,859 Transfers from property, plant and equipment (Note 5) 32,370 - Additions during the year - 12,786 At 31 December 118,015 85,645
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (81) 37 Investment properties (continued) The Group started construction of its head quarter project in 2021. The project consists of two towers (residential tower and office tower) with common area and retail outlets . The Group intends to occupy office tower for its own use and is classified as property, plant and equipment (Note 5) which is expected to be completed by second quarter of 2025. The residential tower is complete and the management intends to lease. During the year ended 31 December 2024 , management revisited its plan of occupation of office tower and concluded to lease three floors for commercial use. As a result, the carrying amount of these floors and related areas were transferred to investment properties from property, plant and equipment (Note 5). The investment property includes Land amounting to AED 2,536 thousand (2023: AED 2,536 thousand). The investment property is carried at cost and its fair value approximates to AED 180,050 thousand. It is valued by qualified independent property valuation firms based on income method and the significant input is rent per square feet. The fair value stated is determined using valuation methods with parameters not based exclusively on observable market data (level 3). Rental income recognised during the year was nil in the consolidated statement of profit or loss (2023: nil). 38 Fair value measurement The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Level 1: inputs that are quoted market price (unadjusted) in an active market for identical instruments. Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for si milar instruments; quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Level 3: inputs that are unobservable. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised.
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (82) 38 Fair value measurement (continued) Level 1 Level 2 Level 3 Total AED’000 AED’000 AED’000 AED’000 31 December 2024 Financial assets at fair value through other comprehensive income (Note 9) 55,709 - - 55,709 Financial assets at fair value through profit or loss (Note 13) - 25,466 - 25,466 55,709 25,466 - 81,175 31 December 2023 Financial assets at fair value through other comprehensive income (Note 9) 54,153 - - 54,153 Financial assets at fair value through profit or loss (Note 13) - 10,000 - 10,000 54,153 10,000 - 64,153 There were no transfers between Level 1, Level 2 and Level 3 fair value measurements. Specific valuation techniques used to value financial instruments include: • the use of quoted market prices or dealer quotes for similar instruments; and • for other financial instruments - discounted cash flow analysis. All of the resulting fair value estimates are included in level 2. 39 Dividends 2024 2023 AED’000 AED’000 Final dividend for the year ended 31 December 2023 AED 0.0425 per share (2023: Final dividend for the year ended 31 December 2022, AED 0.0425 per share) 425,000 425,000 Interim dividend for the year ended 31 December 2024 AED 0.0425 per share (2023: AED 0.0425 per share) 425,000 425,000 Total dividends 850,000 850,000
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Emirates Central Cooling Systems Corporation P.J.S.C Notes to the consolidated financial statements for the year ended 31 December 2024 (continued) (83) 39 Dividends (continued) During the year 2024 , a final dividend of AED 425,000 thousand (AED 0.0425 per share) in respect of the year ended 31 December 2023 was declared and approved in the Annual General Assembly Meeting held on 27 March 2024 which was paid on 23 April 2024 (2023: Final dividend of AED 425,000 thousand (AED 0. 0425 per share)). Further an interim dividend of AED 425,000 thousand (AED 0.0425 per share) in respect of the six-month period ended 30 June 2024 was declared and approved on 23 September 2024 by the Board of Directors of the Group and subsequently paid on 18 October 2024 (2023: Interim dividend of AED 425,000 thousand (AED 0.0425 per share)).