-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LfjxX/vS0y6xoZRyigbPP5NT2YLY9IrjQ+Iix53N14tLsayohxnSrgfDatQDvnvY xOh4F1frXJ+nwkegIx7/iA== 0000950157-02-000900.txt : 20021231 0000950157-02-000900.hdr.sgml : 20021231 20021231151448 ACCESSION NUMBER: 0000950157-02-000900 CONFORMED SUBMISSION TYPE: 18-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20021231 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROVINCE OF NEW BRUNSWICK CENTRAL INDEX KEY: 0000862406 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 8880 [8880] FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 18-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-34344 FILM NUMBER: 02873771 BUSINESS ADDRESS: STREET 1: 1251 AVENUE OF THE AMERICAS STREET 2: CANADIAN CONSULATE GENERAL CITY: NEW YORK STATE: NY ZIP: 10020 MAIL ADDRESS: STREET 1: P O BOX 6000 CITY: FREDEREICTON NEW BRUNSWICK STATE: A1 ZIP: E3B5H1 18-K 1 form18k.txt ANNUAL REPORT FORM 18-K For Foreign Governments and Political Subdivisions Thereof SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT of PROVINCE OF NEW BRUNSWICK CANADA (Name of Registrant) Date of end of last fiscal year: March 31, 2002 SECURITIES REGISTERED * (As of close of fiscal year) ================================================================================ Amounts as to Names of Title of issue which registration exchanges on is effective which registered - ---------------------- ---------------------------- ------------------------ N/A N/A N/A ================================================================================ Names and addresses of persons authorized to receive notices and communications from the Securities and Exchange Commission: HON. PAMELA WALLIN Canadian Consulate General 1251 Avenue of the Americas New York, NY 10020 or BRIAN SCHUMACHER DAVID MURCHISON Canadian Consulate General Canadian Consulate General 1251 Avenue of the Americas 1251 Avenue of the Americas New York, NY 10020 New York, NY 10020 Copies to: JOHN W. WHITE BRYAN MACDONALD Cravath, Swaine & Moore Assistant Deputy Minister Worldwide Plaza Treasury Division 825 Eighth Avenue Province of New Brunswick New York, NY 10019 P.O. Box 6000 Fredericton, NB, Canada E3B 5H1 * The Registrant is filing this annual report on a voluntary basis. 2 The information set forth below is to be furnished: 1. In respect of each issue of securities of the registrant registered, a brief statement as to: (a) The general effect of any material modifications, not previously reported, on the rights of the holders of such securities. None. (b) The title and the material provisions of any law, decree or administrative action, not previously reported, by reason of which the security is not being serviced in accordance with the terms thereof. None. (c) The circumstances of any other failure, not previously reported, to pay principal, interest, or any sinking fund or amortization installment. None. 2. A statement as of the close of the last fiscal year of the registrant giving the total outstanding of: (a) Internal funded debt of the registrant. (Total to be stated in the currency of the registrant. If any internal funded debt is payable in a foreign currency, it should not be included under this paragraph (a), but under paragraph (b) of this item). Reference is made to page 29 of Exhibit (d) hereto. (b) External funded debt of the registrant. (Totals to be stated in the respective currencies in which payable. No statement needs to be furnished as to intergovernmental debt.) Reference is made to page 29 of Exhibit (d) hereto. 3. A statement giving the title, date of issue, date of maturity, interest rate and amount outstanding, together with the currency or currencies in which payable, of each issue of funded debt of the registrant outstanding as of the close of the last fiscal year of the registrant. Reference is made to pages 48 and 49 of Exhibit (d) hereto. 4. (a) As to each issue of securities of the registrant which is registered, there should be furnished a break-down of the total amount outstanding, as shown in Item 3, into the following: (1) Total amount held by or for the account of the registrant. As at March 31, 2002, the total amount held by or for the account of the registrant was as follows:
Date of Maturity Interest Rate (%) Series Amount Outstanding Amount held in Sinking Fund Date Issued ---------------- ----------------- ------ ------------------ --------------------------- ----------- 1 Oct 2002 7 1/8 EL US$257,000,000 US$17,630,000 Oct 1992 Dec 1993 29 June 2004 7 5/8 EY 200,000,000 17,000,000 June 1994 20 June 2005 6 1/2 FH 150,000,000 49,455,000 June 1995 15 Feb 2013 7 5/8 EO 200,000,000 12,400,000 Feb 1993 15 Aug 2013 6 3/4 ET 200,000,000 53,567,000 Sept 1993 3 Mar 2018 9 1/2 DM 139,005,000 -- Mar 1988 15 May 2020 9 3/4 DU 200,000,000 5,000,000 May 1990 1 May 2022 8 3/4 EI 200,000,000 -- May 1992
3 (2) Total estimated amount held by nationals of the registrant (or if registrant is other than a national government by the nationals of its national government); this estimate need be furnished only if it is practicable to do so. Not practicable to furnish. (3) Total amount otherwise outstanding.
Amount Otherwise Date of Maturity Interest Rate (%) Series Outstanding Date Issued - ---------------- ----------------- ------ ----------- ----------- 1 Oct 2002 7 1/8 EL US$239,370,000 Oct 1992 Dec 1993 29 June 2004 7 5/8 EY 183,000,000 June 1994 20 June 2005 6 1/2 FH 100,545,000 June 1995 15 Feb 2013 7 5/8 EO 187,600,000 Feb 1993 15 Aug 2013 6 3/4 ET 146,433,000 Sept 1993 3 Mar 2018 9 1/2 DM 139,005,000 Mar 1988 15 May 2020 9 3/4 DU 195,000,000 May 1990 1 May 2022 8 3/4 EI 200,000,000 May 1992
(b) If a substantial amount is set forth in answer to paragraph (a)(1) above, describe briefly the method employed by the registrant to reacquire such securities. The Province of New Brunswick sinking fund is a general investment type fund. The Provincial Loans Act and in some cases the terms and conditions of the debenture issue specify the minimum rate at which sinking fund installments will be made. Purchases of bonds into the fund are generally discretionary. Many of the bonds purchased into the fund are New Brunswick or New Brunswick guaranteed bonds. The Province is also permitted to buy debt instruments issued or guaranteed by the Government of Canada or any province of Canada and other debt instruments defined by the Provincial Loans Act. 5. A statement as of the close of the last fiscal year of the registrant giving the estimated total of: (a) Internal floating indebtedness of the registrant. (Total to be stated in the currency of the registrant.) Reference is made to pages 30, 48 and 49 of Exhibit (d) hereto. (b) External floating indebtedness of the registrant. (Total to be stated in the respective currencies in which payable.) Reference is made to page 48 of Exhibit (d) hereto. 6. Statements of the receipts, classified by source, and of the expenditures, classified by purpose, of the registrant for each fiscal year of the registrant ended since the close of the latest fiscal year for which such information was previously reported. These statements should be so itemized as to be reasonably informative and should cover both ordinary and extraordinary receipts and expenditures; there should be indicated separately, if practicable, the amount of receipts pledged or otherwise specifically allocated to any issue registered, indicating the issue. Reference is made to pages 18 to 26 and 45 to 47 of Exhibit (d) hereto. 7. (a) If any foreign exchange control, not previously reported, has been established by the registrant (or if the registrant is other than a national government, by its national government), briefly describe such foreign exchange control. None. 4 (b) If any foreign exchange control previously reported has been discontinued or materially modified, briefly describe the effect of any such action, not previously reported. Not applicable. This annual report comprises: (a) Pages numbered 1 to 5 consecutively. (b) The following exhibits: (d) Current Province of New Brunswick Description. (e) Audited Financial Statements of the Province of New Brunswick for the fiscal year ended March 31, 2002, as published in the Public Accounts. (f) Consent of the Auditor General of the Province of New Brunswick. (g) Audited Financial Statements of New Brunswick Power Corporation for the fiscal year ended March 31, 2002, as published in its annual report. (h) Consent of Deloitte & Touche. This annual report is filed subject to the Instructions for Form 18-K for Foreign Governments and Political Subdivisions Thereof. 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, at Fredericton, Canada on the 31st day of December, 2002. Province of New Brunswick By: /s/ Bryan MacDonald ----------------------------- Bryan MacDonald Assistant Deputy Minister Treasury Division Department of Finance 6 EXHIBIT INDEX (d) Current Province of New Brunswick Description. (e) Audited Financial Statements of the Province of New Brunswick for the fiscal year ended March 31, 2002 as published in the Public Accounts. (f) Consent of the Auditor General of the Province of New Brunswick. (g) Audited Financial Statements of New Brunswick Power Corporation for the fiscal year ended March 31, 2002 as published in its annual report. (h) Consent of Deloitte & Touche. EX-99.D 3 ex99-d.txt CURRENT DESCRIPTION Exhibit D [GRAPHICS OMITTED] New Nouveau Brunswick CANADA December 2002 TABLE OF CONTENTS Page Map of the Province...................................................... 3 Province of New Brunswick................................................ 4 General Information............................................. 5 The Economy..................................................... 6 Revenue and Expenditure of the Province......................... 18 Financing....................................................... 27 Consolidation of New Brunswick Public Sector Debt............... 32 Public Sector Pension Liabilities............................... 32 New Brunswick Power Corporation................................. 33 Tables and Supplementary Information of the Province............ 45 Funded Debt Outstanding at March 31, 2002....................... 48 Foreign Exchange......................................................... 51 Sources of Information................................................... 51 All dollar amounts herein are in Canadian dollars unless otherwise specified. On December 18, 2002, the noon buying rate in the City of New York for cable transfers payable in Canadian dollars, as reported by The Federal Reserve Bank of New York, was $1.5537 per U.S. dollar. Financial data for the Province of New Brunswick ("New Brunswick" or the "Province") have been rounded. Certain information presented in tabular form may not add to the total presented due to such rounding. Certain historical financial data for the Province have been restated to reflect several accounting changes including the recognition of the following liabilities: accrued retirement allowance entitlements; accrued summer pay for teachers; accrued vacation pay entitlements and liability for Workers' Compensation benefits for Provincial employees (fiscal year ended March 31, 1998) and recognition of Harmonization Transitional Payments as per the federal government's funding formula, carrying low interest loans made by the Province as an asset at net present value instead of at face value, recording all long term leases of real property as capital leases, inclusion of Service New Brunswick's financial position and results of operations in the Province's financial statements using the consolidation method, inclusion of Hospital Corporation's financial positions and results of operations using the equity method (fiscal year ended March 31, 1999), and the adoption by NB Power of a new accounting policy requiring immediate recognition of foreign exchange gains or losses (fiscal year ended March 31, 2002.) Compound annual rates of growth are computed by using the "geometric average method", which is based on first and last year observations of the variables rather than all observations over the period concerned. 2 [GRAPHICS OMITTED] [MAP] 3 PROVINCE OF NEW BRUNSWICK The following summary information is qualified in its entirety by the information contained herein.
Compound Year ended March 31, Annual (Canadian dollars in millions) Growth Rate ------------------------------------------------------------ 1997 1998 1999 2000 2001 1997-2001 ---- ---- ---- ---- ---- --------- Economy(1) Gross Domestic Product at market prices $16,845 $17,633 $19,005 $20,008 $20,507 5.0% Personal Income 15,118 15,835 16,628 17,436 18,183 4.7% Retail Trade 5,656 6,043 6,609 6,905 7,070 5.7% Manufacturing Shipments 8,364 8,135 9,541 11,419 12,250 10.0% Foreign Commodity Exports 5,471 5,459 6,085 7,402 8,215 10.7% Population at July 1 (in thousands) 754 753 756 756 756 0.1% Unemployment Rate 12.7% 12.2% 10.2% 10.0% 11.2% --- Change in Consumer Price Index 1.9% 0.6% 1.6% 3.3% 1.7% ---
Year ended March 31, (Canadian dollars in millions) --------------------------------------------------------- Budget Estimates 1999 2000 2001 2002 2003 ------- ------- ------- ------- --------- Government Finance Ordinary Account Surplus (Deficit) $(159.8) $ 8.9 $ (81.5) $ (2.3) $(102.0) Net Capital Expenditure (283.3) (253.4) (141.9) (183.0) (209.8) Surplus (Deficit) on Special Purpose Account 8.7 7.3 6.7 3.6 1.5 Surplus (Deficit) on Special Operating Agency 5.3 (0.8) 6.0 (2.6) 11.6 Earnings from Sinking Fund 226.5 203.7 220.0 230.9 240.0 ------- ------- ------- ------- ------- Surplus (Deficit) from Operations (199.7) (27.3) 115.8 143.8 (58.7) Year ended March 31, (Canadian dollars in millions) ----------------------------------------------------------- 1998 1999 2000 2001 2002 -------- -------- -------- -------- -------- Provincial Purpose Funded Debt and Capital Loans[2] Gross Funded Debt and Capital Loans $6,685.1 $7,194.0 $7,408.5 $7,656.2 $8,004.7 Less Sinking Funds 2,440.0 2,693.2 2,925.5 3,130.2 3,358.8 -------- -------- -------- -------- -------- Net Funded Debt and Capital Loans $4,245.1 $4,500.8 $4,483.0 $4,526.0 $4,645.9 ======== ======== ======== ======== ========
Year ended March 31, (Canadian dollars in millions) 1998 1999 2000 2001 2002 -------- -------- -------- -------- -------- Advances to New Brunswick Power Corporation [2] Gross Advances $3,021.1 $3,017.1 $2,930.3 $3,061.1 $3,121.7 Less Sinking Funds 205.2 251.2 295.2 297.3 327.4 -------- -------- -------- -------- -------- Net Advances $2,815.6 $2,765.9 $2,635.1 $2,763.8 $2,794.3 ======== ======== ======== ======== ======== Year ended March 31, (Canadian dollars in millions) 1998 1999 2000 2001 2002 -------- -------- -------- -------- -------- Contingent Liabilities Gross Contingent Liabilities $45.4 $64.5 $50.6 $135.7 $151.4 Less Sinking Funds ----- ----- ----- ------ ------ Net Contingent Liabilities $45.4 $64.5 $50.6 $135.7 $151.4 ===== ===== ===== ====== ====== ________________________________ 1Source: Statistics Canada - Numbers are subject to adjustment. 2Foreign currency issues are expressed as the Canadian dollar equivalent at fiscal year end rates of exchange or, where hedges are in place, at the rates of exchange established by such hedges.
4 PROVINCE OF NEW BRUNSWICK GENERAL INFORMATION INTRODUCTION The province of New Brunswick is located on the eastern seaboard of Canada and has a total area of 28,355 square miles of which about 12,877 square miles is Crown land owned by the Province. The St. John River flows for a distance of over 300 miles through the province to its mouth on the Bay of Fundy. The province's population is concentrated principally in the valleys of the St. John and other rivers. A large part of New Brunswick is covered by forests, which constitute a major natural resource. Other natural resources include fish and shellfish, farmland and base metals, coal, potash, limestone and other minerals. The location of the province provides the advantage of cost effective water transportation for its products to export markets in the eastern U.S., Great Britain and Western Europe. Saint John, New Brunswick's largest city, located at the mouth of the St. John River on the Bay of Fundy, is one of the two principal seaports in eastern Canada that remain open throughout the year. Consequently, some Canadian shipping, which would otherwise pass through the St. Lawrence River, is diverted to the Saint John port during the winter months. According to Statistics Canada, the population of the province on July 1, 2002 was estimated at 756,652. The three largest urban areas of New Brunswick and their respective populations based on 2001 census figures are Saint John (122,678), Moncton (117,727) and Fredericton (81,346), the capital of the province. GOVERNMENT Canada consists of a federation of provinces and federal territories with a constitutional division of powers between the federal and provincial governments established by the Constitution Act, 1867 and the Constitution Act, 1982. Under these Acts the Provinces are assigned jurisdiction over health, social services, education, municipal institutions, property and civil rights, natural resources and other matters of purely private or local concern. The Parliament of Canada has jurisdiction over all areas not assigned exclusively to the provincial legislatures, including such matters as the federal public debt and property, the regulation of trade and commerce, currency and coinage, banks and banking, national defense, the postal services, railways and navigation and employment insurance. The Constitution Act, 1982 provides for enlarged provincial jurisdiction over and taxation of certain natural resources and electrical energy, a Charter of Rights and Freedoms, including language rights, the principles of the reduction of regional economic disparities and the making of fiscal equalization payments to certain Provinces by the Government of Canada, and for the amendment of the constitution in Canada. Each Province owns mineral and other resources on its provincial Crown Lands and may own sub-surface resources on its other lands. The executive power in New Brunswick is vested in the Lieutenant-Governor acting on the advice of the Executive Council. The Executive Council is responsible to the Legislative Assembly. The Lieutenant-Governor, who is the representative of the Queen, is appointed by the Governor-General of Canada in Council on the recommendation of the Prime Minister of Canada. Members of the Executive Council are appointed by the Lieutenant-Governor on the nomination of the Premier from members of the Legislative Assembly. There are presently 16 members of the Executive Council, including the Premier, the Honourable Bernard Lord. The present Lieutenant-Governor, Her Honour Marilyn Trenholme Counsell, took office on April 18, 1997. Legislative power is exercised by the Legislative Assembly and legislation becomes effective upon the assent of the Lieutenant-Governor unless otherwise specified in the legislation. The Legislative Assembly is elected for a term of five years and may be dissolved at any time by the Lieutenant-Governor on the advice of the Premier. Forty-seven members are from the Progressive Conservative Party, seven members are from the Liberal Party and one member is from the New Democratic Party. The last provincial general election was held on June 7, 1999. 5 REGIONAL COOPERATION New Brunswick, along with Nova Scotia and Prince Edward Island, is one of the three Maritime provinces of Canada. In the summer of 1992, each of the Maritime provinces enacted common legislation which set out a vision of economic union within the region. Since the enactment of the Maritime Economic Cooperation Act, Maritime governments have pursued joint initiatives in many sectors of the economy aimed at enhancing the competitiveness of the region's business community and providing more efficient and effective public services within the region. Recently, regional economic cooperation was formally extended to include all four Atlantic provinces, the three Maritime provinces plus the Province of Newfoundland and Labrador. The Council of Atlantic Premiers held its first session on May 15, 2000 in Moncton, New Brunswick, at which time a Memorandum of Understanding on Atlantic Canada Cooperation was signed. INTERNATIONAL TRADE AGREEMENTS The Government of New Brunswick believes that Canada's participation in the Canada-U.S. Free Trade Agreement and North American Free Trade Agreement improves the province's international trade opportunities, particularly with neighbouring U.S. states. The conclusion of the Uruguay Round of GATT, and the subsequent formation of the World Trade Organization, is beneficial for the export-oriented economies of both Canada and New Brunswick. The launch of another round of WTO negotiations in November 2001 is seen as complimentary to bilateral agreements with the U.S. Secure access to U.S. markets for the vast majority of the province's exports continues. The Province participates actively on Federal/Provincial consultative committees concerned with implementation and future negotiation issues. On March 22, 2002, the U.S. Department of Commerce (DOC) found that Canadian softwood lumber producers, other than those from Atlantic Canada, had benefited from countervailable subsidies, and also found that Canadian producers of softwood lumber had sold their product below fair market value. The DOC set the Countervailing Duty (CVD) rate at 18.79% and the "all others" Anti-Dumping (AD) rate at 8.43%. As a result of our exemption from the subsidies case, New Brunswick and all other Atlantic Canada softwood lumber producers are paying only the 8.3% AD rate at the U.S. Canada border. Formal negotiations between the US and Canada broke down in March of 2002, however meetings between Canadian, federal and provincial, "Heads of Delegation" and US DOC representatives have continued. New Brunswick will continue to support the Canadian federal government on both the litigation track, as cases move forward before both WTO and NAFTA panels, and in pursuing political discussions and negotiations towards a long term solution. THE ECONOMY RECENT DEVELOPMENTS The impact of problems in world financial markets, recession in the U.S. and slower growth in the European Union and Japan, as well as acts of terrorism, slowed Canadian economic growth in 2001. Real Gross Domestic Product at market prices ("Real GDP") growth for Canada was estimated to have increased 1.5% in 2001, down from a 4.5% increase the previous year. Economic growth for New Brunswick for 2001 also slowed from the previous year as personal consumption and business investment decreased from high rates of increase experienced over the 1998 to 2000 period. Estimated Real GDP growth for New Brunswick in 2001 is for an increase of 1.0% from the previous year. Nationally, economic growth was led by Nova Scotia and Alberta, which experienced increases above the national average due to energy production. For New Brunswick, growth was centered in a diverse group of service industries including, information and cultural, professional, scientific and technical and finance. Output from the goods producing sector declined 2.9% as stable performances in most sectors were offset by a decline in the construction industry as activity weakened from the historical highs of 1999 and 2000. Output from the service sector increased 2.1%. 6 In 2001, retail sales in New Brunswick increased 2.4%, over the year 2000 level compared to a 4.4% national increase. Following several strong years, new motor vehicles sales posted a 7.9% decrease. New Brunswick's Consumer Price Index increased 1.7%, compared to a 2.6% increase for Canada. Despite the problems in world commodity markets, New Brunswick manufacturing shipments in 2001 increased 7.3% over 2000, compared to the national decrease of 5.3%. Wages and salaries earned in New Brunswick increased 3.7% to $9.7 billion in 2001, modestly below the national rate of 4.4%. New Brunswick's housing starts in 2001 totalled 3,462, a 12.4% increase from 2000. With the completion of large investment projects in the manufacturing, transportation and the utilities sectors, capital investment in the province decreased 16.9% from 2000. However, total capital spending was the third highest in history, exceeded only by the 1999 and 2000 expenditures. Capital investment in Canada increased by 4.5% in 2001. In the agriculture sector, farm cash receipts increased 12.5% in 2001 with potato receipts up 31.8%. The value of mineral production in New Brunswick rose 2.2%, as an increase in the base metals sector offset a drop in the value of non-metallic products. Foreign exports increased 11.0% in 2001 to $8.2 billion. The value of energy products increased 41.4% over the 2000 level while food products increased 8.7%. However, declines in world commodity prices led to a 16.1% decline in export value of forestry products. New Brunswick's employment level in 2001 was unchanged from 2000. With the labour force continuing to expand, the unemployment rate increased from 10.0% in 2000, the lowest rate since 1976, to 11.2% in 2001. ECONOMIC ACTIVITY In 2001, the nominal value of GDP of New Brunswick was estimated at $20,507 million (in current prices) or $27,090 per capita. Over the 1997 to 2001 period, Real GDP grew at a compound annual growth rate of 3.0% compared to a national rate of growth of 3.9%. Between 1997 and 2001, the output from goods producing industries increased at a compound annual growth rate of 2.6% to $5,109.3 million, while output from the service producing industries increased at a compound annual growth rate of 3.4% to $12,199.6 million. The gross value of manufacturing shipments increased at a compound annual growth rate of 10.0% (in current prices) over the 1997 to 2001 period and foreign exports of commodities rose at a compound annual growth rate of 10.7% (in current prices). Personal income has increased from $15,118 million in 1997 to $18,138 million in 2001 (in current prices), a compound annual growth rate of 4.7%. On a per capita basis, personal income increased from $20,050 to $23,960 (in current prices) over the same period, growing at a compound annual growth rate of 4.6%, modestly in advance of the national compound annual growth rate. Retail sales for New Brunswick increased at a compound annual growth rate of 5.7% (in current prices) over the same period. 7 The following table sets forth selected indices of economic activity for New Brunswick and for Canada as a whole for the years 1997 through 2001.
SELECTED ECONOMIC INDICATORS Compound Year Ended December 31, Annual --------------------------------------------------------------- Growth Rate 1997 1998 1999 2000 2001 1997-2001 -------- -------- -------- ---------- ---------- ----------- (millions of dollars) Gross Domestic Product at market prices $ 16,845 $ 17,633 $ 19,005 $ 20,008 $ 20,507 5.0 Gross Domestic Product (Canada) at market prices 882,733 914,973 980,524 1,064,995 1,092,246 5.5 Per Capita Gross Domestic Product (in dollars) 22,341 23,417 25,206 26,501 27,090 4.9 Per Capita Gross Domestic Product (Canada) (in dollars) 29,437 30,249 32,149 34,611 35,141 4.5 Personal Income 15,118 15,835 16,628 17,436 18,138 4.7 Per Capita Personal Income (in dollars) 20,050 21,029 22,053 23,094 23,960 4.6 Per Capita Personal Income (Canada) (in dollars) 23,860 24,740 25,693 27,263 28,076 4.2 Private and Public Investment (new) 2,763 3,157 3,956 3,924 3,262 4.2 Retail Trade 5,656 6,043 6,609 6,905 7,070 5.7 Manufacturing Shipments 8,364 8,135 9,541 11,419 12,250 10.0 Foreign Commodity Exports 5,471 5,459 6,085 7,402 8,215 10.7 Real Gross Domestic Product (chained 1997 dollars) $ 16,845 $ 17,462 $ 18,529 $ 18,785 $ 18,972 3.0 Real Gross Domestic Product (Canada) at market prices (chained 1997 dollars) 882,733 918,910 968,451 1,012,335 1,027,523 3.9 Change in Consumer Price Index 1.9% 0.6% 1.6% 3.3% 1.7% Change in Consumer Price Index (Canada) 1.6% 0.9% 1.7% 2.7% 2.6% Source: Statistics Canada.
8
NEW INVESTMENT The following table sets forth statistics regarding new investment in New Brunswick, by sector, and compares total new investment with Canada as a whole. NEW INVESTMENT Year Ended December 31, ----------------------------------------------------------------- 1997 1998 1999 2000 2001[1] ---------- ---------- ---------- ---------- ---------- (millions of dollars) Construction Investment Housing $ 629.6 $ 587.6 $ 645.6 $ 726.7 $ 794.5 Transportation and Warehousing 17.3 217.4 420.1 nd 43.3 Manufacturing 81.9 158.5 375.7 nd 71.0 Public Administration 437.5 411.9 595.0 485.3 370.6 Utilities nd 55.8 101.2 135.2 146.7 Finance and Insurance 7.1 24.9 34.6 14.8 15.3 Mining and Oil and Gas Extraction 73.1 nd nd 89.6 74.1 Agriculture, Forestry, Fishing and Hunting 54.3 32.7 31.4 32.3 31.3 Educational Services 38.1 27.4 45.8 51.1 50.8 Retail Trade 36.8 44.4 18.9 22.4 43.7 Information and Cultural Industries 65.0 nd nd 26.5 34.7 Health Care and Social Assistance 27.3 20.8 24.2 12.5 24.0 Construction 7.4 7.5 9.1 9.5 7.3 Real Estate and Rental and Leasing 16.1 13.3 29.1 21.7 18.6 Professional, Scientific & Technical Services 4.8 2.6 2.8 3.9 5.3 Administrative & Support, Waste Management & Remediation Services 15.9 4.6 8.6 10.0 16.4 Accommodation and Food Services 3.5 10.3 5.4 5.2 3.6 Wholesale Trade 7.1 9.0 8.7 13.2 11.4 Other Services 4.5 nd 6.7 5.5 3.3 Management of Companies & Enterprises nd nd 0.1 2.8 nd Arts, Entertainment and Recreation 0.5 2.8 1.8 1.9 nd ---------- ---------- ---------- ---------- ---------- Total Construction[2] 1,588.4 1,734.7 2,456.6 2,355.9 1,768.1 ---------- ---------- ---------- ---------- ---------- Machinery Equipment Investment Manufacturing 324.1 345.2 442.9 nd 320.3 Finance and Insurance 117.9 175.4 158.1 190.0 179.4 Information and Cultural Industries 158.3 nd nd 141.8 202.0 Transportation and Warehousing 56.7 142.3 100.0 nd 89.2 Construction 67.1 71.9 71.7 72.3 56.4 Agriculture, Forestry, Fishing and Hunting 45.1 58.7 56.0 56.7 54.7 Utilities nd 27.8 62.8 113.9 70.8 Retail Trade 91.6 63.2 44.8 54.7 71.6 Professional, Scientific & Technical Services 43.2 53.8 32.5 41.7 49.3 Public Administration 83.0 98.0 113.3 124.8 122.0 Real Estate and Rental and Leasing 7.1 28.9 66.1 94.7 79.5 Wholesale Trade 46.4 60.4 86.4 49.3 38.3 Mining and Oil and Gas Extraction 32.5 nd nd 42.7 31.5 Health Care and Social Assistance 25.2 23.6 20.3 28.3 28.5 Educational Services 17.7 16.9 24.6 20.3 22.1 Administrative & Support, Waste Management & Remediation Services 11.1 18.5 21.6 32.9 48.6 Accommodation and Food Services 10.1 12.6 26.2 10.2 7.4 Other Services 17.5 nd 13.9 14.3 12.9 Management of Companies & Enterprises nd nd 2.3 7.4 nd Arts, Entertainment and Recreation nd 6.2 3.0 3.1 nd ---------- ---------- ---------- ---------- ---------- Total Machinery and Equipment[2] 1,174.0 1,422.0 1,499.5 1,568.4 1,493.6 ---------- ---------- ---------- ---------- ---------- Total New Investment $ 2,762.5 $ 3,156.8 $ 3,956.1 $ 3,924.3 $ 3,261.7 ========== ========== ========== ========== ========== Total New Investment (Canada) $168,195.0 $173,765.1 $178,343.9 $187,358.1 $195,854.9 ========== ========== ========== ========== ========== [1] Preliminary actual. [2] Total investments include amounts which are not separately disclosed by Statistics Canada. nd: not disclosed Source: Statistics Canada.
9 Major investments in the 1990s included projects in the refined petroleum products, power generation, real estate, food processing, electronic products, communications, transportation, health, recreation, education and forestry-related industries. The New Brunswick economy slowed markedly in 2001 due to a sharp decrease in capital investment following the completion of major investment projects in the province and the U.S. economic recession. The U.S. is the province's main export destination. Despite these events, manufacturing shipments and exports increased significantly due to the higher price of refined petroleum products and increased production levels at the Irving Oil refinery following completion of its $1-billion upgrade in 1998-2000 to increase capacity and produce higher-value gasolines and diesel fuels. In 1999, Enbridge Gas New Brunswick, a joint venture between Enbridge Inc. and 28 New Brunswick investors, was awarded the province's natural gas distribution franchise. Over the life of the 20-year contract, Enbridge Gas New Brunswick intends to spend $300 million in capital investment in building a 1,450-km natural gas distribution system, and plans on having 70,000 customers at the end of this period. Construction on the distribution pipeline started in the spring of 2000, with an estimated 3,400 construction jobs to be created over the next 20 years, a large proportion of these occurring over the first five years of the project. In 2001, Enbridge Gas New Brunswick continued developing the natural gas distribution system in the province. Six marketer firms served the Saint John, Moncton, Fredericton and St. George areas with emphasis on the large industrial and commercial customers. Bayside Power became fully operational in late 2001 as Westcoast Energy undertook the $180-million conversion of NB Power's oil-fired unit at Courtenay Bay to natural gas. The plant makes deliveries to NB Power during the winter season and sells power to the New England Power Pool market the remainder of the year. Over the past two years, Aliant (owner of NBTel) and Rogers Communications Inc. (previously Shaw Communications Inc.) have made significant investments in the province's telecommunications system. During this period, Aliant has spent more than $200 million to offer new services to its customers, such as broadband Internet services and an interactive television system in New Brunswick. Rogers AT&T Wireless expanded network coverage throughout the province in 2001 at a cost of $15 million. Rogers Television New Brunswick (RTNB), a new local programming channel was recently launched. Investment of $1.6 million was made in new equipment and resources for the cable network, which has stations in six cities. During the 1990s, significant funds were directed at the New Brunswick highway system. During 1998, it was announced that The Canada-New Brunswick Highway Improvement Agreement would be extended. The three-year agreement, which began in April 1998, is worth approximately $300 million and is on a 50-50 cost-shared basis between the Province and the Federal Government. In January 1998, the Province also entered into a public-private partnership to build a state-of-the-art four-lane highway between Fredericton and Moncton, which was completed in November 2001 fully five weeks ahead of schedule. Total capital costs of the project were approximately $860 million. In 2000, with the removal of the tolls, the Province became responsible for the toll-based debt, in addition to the lease-based debt. FOREIGN EXPORTS OF COMMODITIES Foreign exports of commodities have become increasingly important to both the New Brunswick and Canadian economies. In 2001, commodity exports were equivalent to 40.1% of GDP, compared to 34.2% for Canada. New Brunswick's foreign exports of commodities, estimated at $8,215.4 million in 2001, increased at a compound annual growth rate of 10.7% over the 1997 to 2001 period. Due to the significance of commodity exports, the economic performance of the province is highly dependent on international economic conditions, particularly in the U.S. In 2001, the U.S. purchased an aggregate of 89% of the province's foreign commodity exports. Energy products (mostly refined petroleum products and some electricity) accounted for 40.5% of all commodity exports that year, followed by forest products (lumber, pulp and paper) with 28.2% and agricultural and fishing products (16.5% of total). Other important commodity exports are fertilizers, plastic products, electronic parts and components, potash and metallic ores (mostly zinc). 10 The table below shows foreign exports of commodities by New Brunswick for the years 1997 to 2001. The largest component, energy products, increased at a compound annual growth rate of 19.1% during that time, due mainly to an increase in world oil prices and a significant upgrade at the refinery in Saint John. Exports of forest products increased at a compound annual growth rate of 2.8%, as world paper prices floundered in 2001. Increasing at a compound annual growth rate of 9.8%, exports of agricultural and fishing products have reported strong increases in recent years to diverse markets such as the U.S., Japan and Europe.
FOREIGN EXPORTS OF COMMODITIES Year Ended December 31, Compound Annual Growth Rate % 1997 1998 1999 2000 2001 1997-2001 -------- -------- -------- -------- -------- ------------- (millions of dollars) Forest Products $2,078.2 $2,399.8 $2,537.3 $2,764.8 $2,319.8 2.8 Energy Products 1,651.3 1,226.1 1,488.9 2,351.1 3,324.2 19.1 Agriculture and Fishing Products 929.6 1,001.7 1,140.4 1,243.5 1,352.3 9.8 Industrial Goods 498.9 448.8 452.0 464.6 584.1 4.0 Machinery and Equipment 208.4 255.3 306.6 412.8 465.7 22.3 Other 104.3 127.0 160.2 165.9 169.1 12.8 -------- -------- -------- -------- -------- ---- Total $5,470.7 $5,459.2 $6,085.4 $7,402.2 $8,215.4 10.7 ======== ======== ======== ======== ======== ==== **** - ------------------------------------- Source: Statistics Canada.
11 Structure of the Economy The New Brunswick economy receives a large contribution from natural resources, especially forestry and forestry-related industries. The provincial economy shows a larger concentration of service industries than goods producing industries compared to Canada as a whole. During the 1997 to 2001 period, GDP at factor cost in the service industries accounted for 69.6% of total GDP compared to 67.7% for Canada. The following table shows GDP at factor cost by industry in New Brunswick for the years 1997 to 2001, valued in 1997 constant dollars.
GROSS DOMESTIC PRODUCT BY INDUSTRY Year Ended December 31, Compound Annual Real Growth Rate % 1997 1998 1999 2000 2001 1997-2001 ---- ---- ---- ---- ---- --------- (millions of 1997 dollars) Goods Producing Industries Manufacturing(1) $2,220.0 $2,369.8 $2,524.2 $2,560.0 $2,533.6 3.4 Construction 813.9 897.8 1,125.7 1,093.9 947.1 3.9 Utilities 631.0 643.3 666.0 644.7 644.5 0.5 Agriculture, Forestry, Fishing and Hunting 621.9 572.7 672.2 683.3 685.3 2.5 Mining and Oil and Gas Extraction 326.5 302.8 291.1 281.4 298.8 (2.2) ----- ----- ----- ----- ----- Total Goods Producing Industries 4,613.3 4,786.4 5,279.2 5,263.3 5,109.3 2.6 Service Producing Industries Transportation and Warehousing 889.6 854.5 958.6 985.8 957.0 1.8 Information and Cultural Industries 510.9 568.2 616.2 713.0 788.6 11.5 Retail Trade 893.2 977.3 1,028.6 1,057.8 1,070.5 4.6 Wholesale Trade 663.0 739.7 771.9 818.8 793.3 4.6 Finance, Insurance and Real Estate 2,702.8 2,803.5 2,841.0 2,899.5 2,962.0 2.3 Public Administration 1,531.6 1,576.0 1,621.8 1,662.1 1,722.4 3.0 Educational Services 882.1 869.8 858.9 847.0 848.2 (1.0) Health Care and Social Assistance 1,138.7 1,172.4 1,218.8 1,245.2 1,261.4 2.6 Professional, Scientific and Technical Services 374.7 411.3 480.7 496.1 544.3 9.8 Administrative and Waste Management Services 170.7 195.5 235.8 245.0 270.3 12.2 Accommodation and Food Services 391.0 397.5 418.1 445.2 444.2 3.2 Arts, Entertainment and Recreation 102.0 105.8 107.0 111.3 111.1 2.2 Other Services (except Public Administration) 406.4 415.2 407.8 416.4 426.3 1.2 ----- ----- ----- ----- ----- Total Service Producing Industries 10,656.7 11,086.7 11,565.2 11,943.2 12,199.6 3.4 Total Real Domestic Product (at basic prices) $15,270.1 $15,873.2 $16,844.5 $17,206.6 $17,308.9 3.2 ========= ========= ========= ========= ========= === - --------------------- (1) Includes natural resources processing: output of forestry-related products accounted for approximately 46.5% of manufacturing GDP at basic prices during the years 1997 through 2001. Source: Statistics Canada
12 Primary Industries Mining. The New Brunswick mining sector has benefited from the development of base metal deposits (zinc, lead, copper and silver ores), potash and peat with increases in employment both directly from and through the development and operation of related smelting, and land and water transportation facilities. The New Brunswick mining industry employs approximately 3,200 people. Despite world commodity prices for base metals trending downward in 2001 over the 2000 level, the total value of mineral production in New Brunswick (including downstream manufacturing) increased by 2.2% to $789.2 million. Metals, which accounted for over 71% of the total value of the Province's mineral production, increased 8.0%, while non-metallics (26% of total production) decreased by 9.6%. Among the metals, zinc continued to be the dominant commodity (over 54% of total production). In 2001, Noranda's Brunswick mine reported record metal production levels, mining an average of 9,863 tonnes of ore per day with a zinc-content recovery rate of nearly 88%. In October of 2001, Noranda closed its Bathurst exploration office as a cost-cutting move. The company has undertaken considerable exploration activity since the 1950s, but was unable to find economically viable deposits of any size. It is expected Brunswick will run out of mineable reserves by 2008. The main non-metal commodities are potash, peat, salt and sulphur in smelter gas. With world prices for potash trending downward, about one-third of the workforce of 330 of the Potash Corporation of Saskatchewan in Sussex was laid off in late 2001 to reduce inventories. Several firms were active in oil and gas drilling projects in southeastern New Brunswick, including Corridor Resources, Columbia Natural Resources and EOG Resources Canada Inc. In the peat industry, a new provincial policy was announced to encourage further value-added production. Structural materials such as lime, stone, sand and gravel contributed about 3% to the value of production. Several limestone quarries were active as were areas producing marl and silica. The Province established a number of initiatives to improve and expand the viability of the mining industry, as recommended in a major study presented in 2000. In addition to the Prospector Development Program and the Junior Mining Assistance Program, there are two new initiatives to assist the exploration and mining industries: an 18% tax credit to companies that undertake advanced exploration and a new mine reclamation fund. The Province also plans to invest in two projects for gold and hydrocarbon exploration in New Brunswick. In 2001, investment in mining exploration in the metallic and industrial minerals sector totaled $9.4 million. A further $25 million was invested in the exploration for natural gas and other hydrocarbons. The following table sets forth the total selling value of mineral production in the province (including the value of concentrating and smelting) for the years 1997 through 2001.
MINERAL PRODUCTION Year Ended December 31, -------------------------------------------------------------------------- 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- (millions of dollars) Base Metals $657.5 $609.9 $595.4 $520.5 $562.3 Fuels, including Coal 18.2 22.9 20.9 22.8 19.8 Non-Metallic Minerals 277.3 230.2 234.5 229.2 207.1 ----- ----- ----- ----- ----- Total $953.1 $863.0 $850.8 $772.5 $789.2 ====== ====== ====== ====== ====== - ----------------------------------- Source: Statistics Canada
13 Forestry. Approximately 83.5% of the land area of the province is forested and roughly one-half of the forested land is owned by the Province as Crown land. Nearly all Crown land is subject to timber licenses and the Province received $49.3 million from Crown land stumpage for the fiscal year ended March 31, 2002. The following table sets forth the most recently published estimates of forest production in New Brunswick for the years 1996 through 2000.
FOREST PRODUCTION Year Ended December 31, 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- (thousands of cubic metres) Pulpwood.................. 3,968 4,542 4,427 3,752 3,573 Logs...................... 6,897 6,683 7,075 7,486 8,231 Other..................... 37 27 33 20 33 -- -- -- -- -- Total..................... 10,902 11,252 11,535 11,258 11,837 ====== ====== ====== ====== ====== - --------------------------------- Source: Statistics Canada.
Information regarding the province's pulp and paper and wood manufacturing industries is set forth below under "Manufacturing". Pulpwood production from year to year is affected by, among other things, weather conditions for harvesting and bears a fluctuating relationship to shipments by the pulp and paper industry. Harvesting of the province's wood resources on Crown lands and industrial freehold lands is in balance with current growth on a sustainable-yield basis. The Province's inventory of wood volume is estimated at 578 million cubic metres, over 68% of which is softwood. Agriculture. The 2001 Census of Agriculture indicated that New Brunswick had 3,034 farms and 388,061 hectares of farmland. The comparable figures from the 1996 census were 3,405 farms and 386,027 hectares. Total gross farm receipts in the province were $445 million in 2000, while operating expenses totalled $384 million. Five years earlier, at 1995 prices, receipts were $326 million and expenses were $284 million. Cattle farms accounted for 26% of all farms in New Brunswick in 2001, followed by fruit operations (13%) and dairy farms (11%). Fishing. Lobster, crab, scallops, shrimp and herring have been the species most important to the primary fishing industry, accounting for nearly 93% of the value of landings estimated at $175 million in 2001, a slight decrease from 2000. The average annual value of fish landings during the 1997-2001 period was $163 million. New methods of processing and marketing frozen and pre-cooked fish and shellfish have expanded market opportunities and increased the competitiveness of the industry. Shipments of processed fish products for 2001 fell 1.5% from 2000 to $949.8 million, still a dramatic increase over the 1997-2001 average of $772 million. Exports of fish products reached $870 million in 2001, a 7.5% increase over 2000. With significantly lower prices for farmed salmon, sales of New Brunswick aquaculture products dropped 1.0% to $279.1 million in 2001, following a decade of steady growth. New Brunswick sales account for 41.3% of the Canadian total, not far behind first-ranked British Columbia. Some of the province's Atlantic salmon aquaculture operations still reported problems with the infectious salmon anemia virus in 2001. The industry is developing new value-added products and is diversifying its product mix thus creating extended employment in processing plants. 14 Secondary Industries Manufacturing. Manufacturing activity in New Brunswick employed approximately 39,000 people in 2001, providing $1,260.8 million in wages and salaries and supplementary labour income compared to $1,228.4 million in 2000. In 2001, the value of manufacturing shipments increased by 7.3% to $12,249.6 million from $11,419.2 million in 2000. The miscellaneous group of manufacturing industries (which includes diverse groups of small plants as well as large producers such as the Irving Oil refinery, the Saint John shipyard and Brunswick Mining and Smelting), accounted for 51.6% of total shipments in 2001 and reported a 28.5% increase in shipments over 2000 mainly due to strong prices for refined petroleum products in the first half of the year. Most other sectors reported a drop in shipments from the previous year, including paper (-18.2%), food (-2.0%) and wood products (-0.9%). Excluding the miscellaneous industries, manufacturing shipments fell 8.8% from the 2000 level. The province's manufacturing sector was enhanced in 2001 by the opening of the Prelco glass factory ($8.8 million) and the expansions of IPL Plastics Inc. ($20 million) and Enseignes Imperial Signs. Despite the closure of Medina Mills, the textile industry experienced solid growth in 2001 and further expansions of Atlantic Fine Yarns and Sunshine Mills were announced for 2002. The table below sets forth the leading industrial groups in the province's manufacturing sector, according to gross selling value of factory shipments, for the years 1997 through 2001.
GROSS SELLING VALUE OF FACTORY SHIPMENTS Compound Year Ended December 31, Annual ------------------------------------------------------------------------Growth Rate Industry 1997 1998 1999 2000 2001 1997-2001 - -------- ---- ---- ---- ---- ---- --------- (millions of dollars) Paper Manufacturing.......................... $1,884.7 $2,072.0 $2,140.9 $2,758.8 $2,255.5 4.6 Food Manufacturing........................... 1,633.8 1,590.3 1,959.4 1,954.2 1,915.3 4.1 Wood Product Manufacturing................... 1,073.9 1,131.7 1,569.6 1,464.5 1,451.7 7.8 Fabricated Metal Product Manufacturing....... nd 194.3 260.2 303.2 284.4 na Textile Product Mills........................ 11.1 12.3 19.2 21.4 24.4 21.8 Miscellaneous Manufacturing(1)............... nd 3,134.9 3,591.2 4,917.2 6,318.2 na Total........................................ $8,363.8 $8,135.5 $9,540.5 $11,419.2 $12,249.6 10.0 ======== ======== ======== ========= ========= ==== - ---------------------- (1) The principal components of "Miscellaneous" are petroleum products, shipbuilding, lead smelting and electrical and electronics commodities. Source: Statistics Canada.
15 Construction. The construction industry is the second largest of the goods-producing industries in terms of contribution to GDP. In 2001, spending on construction activity, although the third highest on record, decreased 16.9% from the 2000 level to $3,261.7 million. Construction activity in Canada reported an increase of 4.5% in 2001. The completion of major projects in road transportation, natural gas distribution and the completion of the Irving Oil refinery upgrade in 2000 led to the decrease in construction activity. Residential construction, the largest component, accounted for 23.1% of capital investment in 2001. Public administration ranked second, and was estimated to account for 15.1% of capital investment. According to preliminary estimates, construction activity in the province in 2002 is expected to reach $3,438.7 million, up 5.4% from 2001. Service Industries Trade. Retail trade amounted to $7,070.3 million in 2001, an increase of 2.4% from 2000, compared to the national rate of increase of 4.4%. Between 1997 and 2001, New Brunswick's compound annual growth rate for retail trade was 5.7%. On a per capita basis, the value of retail sales was $9,353 for New Brunswick and $9,294 for Canada as a whole. Transportation. New Brunswick has an extensive infrastructure of road, rail, water and air transportation services. In addition, the province has an area air traffic control centre that controls aircraft within the Maritime provinces, plus a part of Quebec and Labrador. Construction continued at the Greater Moncton Airport to build a new $22.3 million air terminal, scheduled for completion in 2002. The Moncton airport set a new record in 2001, serving more than 400,000 customers. Construction also began on a $9.5 million extension at the Greater Fredericton Airport with completion scheduled for 2002. There are also plans for terminal renovations, an apron expansion and a new international arrivals gate. In addition, the Saint John Airport Authority announced a $3.3 million expansion project. A major ice-free port in Saint John handled a record 26 million metric tonnes of cargo in 2001, an increase of 31.7% over 2000. Declines in shipments of potash, and forest products were offset by increased shipments of petroleum products. Cruise vessels made 53 calls at the Saint John port bringing over 88,000 passengers to the area. The Saint John Port Authority announced plans to invest $14 million in capital works over five years, with $5 million to be spent in the first year. The port of Belledune handled over 2 million tonnes in 2001, a rise of 21.5% over the previous year. Capital investment of $3.2 million is planned for 2002. Communications and Technology. Employment in technology and communication surpassed 40,000 in 2001 with growth above the provincial average at 13.0%. This group accounts for almost 8% of New Brunswick's GDP. Some 90 customer contact centres employ about 15,000 people in the province. New jobs for 2001 were mainly created at CIBC, the Spiegel Group and Virtual-Agent Services. Announcements involving Rogers Communications, Moneris Solutions, Imperial Oil, ClientLogic and Connect North America point to continued growth for the industry. Aliant spent $200 million over the 2000-2001 period to develop broadband Internet services and an interactive television system in New Brunswick. The company is also expanding its digital cellular service along the main highways. Rogers AT&T Wireless expanded network coverage throughout the province in 2001 at a cost of $15 million. Rogers Television New Brunswick (RTNB), a new local programming channel was recently launched. Investment of $1.6 million was made in new equipment and resources for the cable network, which has stations in six cities. New Brunswick's information technology sector, which is made up of approximately 250 companies, employs some 5,000 people. Approximately half of these IT companies are located in Fredericton with the remainder concentrated in Saint John and Moncton. Construction of the $25.5-million National Research Council Institute for Information Technology - e-Business began in 2001 and was completed in 2002. The institute will build research and working relationships with companies, universities and other partners across the province. The institute is expected to be an incubator for e-commerce concepts and initiatives. Tourism. In recent years, tourism has made a significant contribution to the economy of the province. Revenues in 2001, at $900 million, declined slightly from 2000's record level. Total visitation fell approximately 3%, as the events of September 11 impacted the industry. Current marketing strategies include community-based initiatives entitled Hometown New Brunswick and The Acadian Experience, access to an online reservation system, and external marketing opportunities in Quebec and New England. 16 Labour Force New Brunswick's labour force reached 376,700 in 2001, an increase of 1.3% over 2000. A weakening world economy led to no change in the annual employment level in 2001, at 334,400. Nationally, the number of employed persons increased 1.1% in 2001. Provincial unemployment stood at 42,200. With employment stable and the labour force increasing, New Brunswick's unemployment rate rose to 11.2%. Nationally, the rate rose from 6.8% in 2000 to 7.2% in 2001. The following table sets forth certain information concerning New Brunswick's labour market.
LABOUR FORCE Average for Year Ended December 31, --------------------------------------------------------------------- 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- (thousands) Population 15 years and over..................... 594.3 596.3 599.5 603.5 605.7 Labour Force..................................... 355.8 361.9 365.7 371.7 376.7 Labour Force Employed............................ 310.7 317.8 328.4 334.4 334.4 Labour Force Unemployed.......................... 45.1 44.1 37.3 37.3 42.2 Unemployment Rate New Brunswick........................... 12.7% 12.2% 10.2% 10.0% 11.2% Canada.................................. 9.1% 8.3% 7.6% 6.8% 7.2% Participation Rate New Brunswick........................... 59.9 60.7 61.0 61.6 62.2 Canada.................................. 64.9 65.1 65.6 65.9 66.0 - -------------------------------- Source: Statistics Canada.
From 1997 to 2001, the number of persons employed in New Brunswick increased 7.6%. Employment in most industries was relatively stable in 2001, with increases in the service sector offsetting declines in the goods producing sector. The following table indicates employment by industry in New Brunswick for the years 1997 through 2001.
EMPLOYMENT BY INDUSTRY Average for Year Ended December 31, ------------------------------------------------------ 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- Goods Producing Sector (thousands) Agriculture........................................ 6.5 6.4 5.8 6.1 6.0 Forestry, Fishing, Mining, Oil and Gas............. 13.3 12.8 12.1 13.2 12.0 Manufacturing...................................... 36.0 36.7 39.3 41.1 39.0 Utilities.......................................... 3.0 3.4 3.7 4.3 4.6 Construction....................................... 18.7 19.8 19.3 19.6 19.2 Service Producing Sector Trade.............................................. 51.9 51.8 54.5 55.1 55.0 Transportation and Warehousing..................... 18.1 17.6 19.0 19.8 19.0 Professional, Scientific and Technical Services.... 10.4 10.9 10.6 11.3 13.1 Management, Administrative and Other Support....... 9.5 9.7 11.3 13.1 16.3 Educational Services............................... 22.2 22.4 22.5 23.2 23.2 Health Care and Social Assistance.................. 36.6 39.5 38.7 40.4 40.3 Information, Culture and Recreation................ 10.6 11.0 13.6 12.4 12.2 Accommodation and Food Services.................... 19.0 20.1 21.7 22.4 24.3 Other Services..................................... 18.9 19.1 19.7 16.9 15.7 Finance, Insurance, Real Estate and Leasing........ 13.9 13.6 13.6 12.7 12.8 Public Administration.............................. 22.2 22.9 22.9 22.9 21.8 ----- ----- ----- ----- ----- Total...................................................... 310.7 317.8 328.4 334.4 334.4 ===== ===== ===== ===== ===== - -------------------------------------- Source: Statistics Canada.
17 Economic Development Economic growth is assisted by the Federal Government's Atlantic Canada Opportunities Agency ("ACOA") which was launched in June 1987 with a mandate to stimulate economic development in the Atlantic provinces. Economic growth is also supported by a Federal-Provincial Regional Economic Development Agreement ("REDA") signed in 1996. The "REDA" is multi-sectoral with the flexibility to respond to different initiatives, which seek to expand the economy or to invest in people and skills in New Brunswick. It consists of three programs: Economic Development, Strategic Opportunities, and Planning. The cost-sharing ratio under the Agreement is 70% Federal and 30% Provincial. An amendment to the "REDA" was signed on August 12, 1999 adding $49.4 million to the original amount of $53.7 million, and extending its life to March 31, 2003. REVENUE AND EXPENDITURE OF THE PROVINCE General Information Under the Constitution Act, 1867 and the Constitution Act, 1982 provincial legislatures are given certain exclusive powers, including the power to impose direct taxation within the provinces to raise revenue for provincial purposes, and the power to borrow money on the sole credit of the provinces. The Financial Administration Act governs the receipt of public money, the disbursement of public funds, the control of expenditures and the keeping and auditing of public accounts of the Province. All public monies are to be deposited to the credit of the Province and constitute the Consolidated Fund of the Province. Monies necessary for the carrying out of the operations of the Provincial Government for each fiscal year are voted by the Legislative Assembly, with the exception of those expenditures for which provision has already been made through existing legislative authority. In addition, under the authority of the Financial Administration Act, should the occasion arise when the Legislative Assembly is not in session, the Lieutenant-Governor in Council may order the issue of a special warrant authorizing payment out of the Consolidated Fund for an expenditure required urgently for the public good which was not provided for by the Legislative Assembly. Amounts appropriated under special warrant must be approved at the next session of the Legislative Assembly. In accordance with the Financial Administration Act and certain other Acts, funds received for a special purpose are to be disbursed for that purpose. Unlike regular appropriations, any unspent balance of these funds may be carried forward to subsequent fiscal years. At March 31, 2002, the balance of unspent special purpose funds was $60.0 million. Funds may also be considered as Special Operating Agency Funds. Revenue may be generated by the Agencies or from transfers from other budgetary accounts. Any unspent balance of these funds may, with permission from the Board of Management as per the Financial Administration Act, be carried forward to subsequent fiscal years. At March 31, 2002, the balance of unspent special operating funds, was $9.8 million. All transactions between the Special Operating Agencies and Provincial departments are eliminated from the Province's combined statement of revenue and expenditure. During the 2001 fiscal year, the Fiscal Stabilization Fund Act was enacted. The Act establishes a fund separate from the Consolidated Fund, for the purpose of assisting in stabilizing the fiscal position of the Province of New Brunswick from year to year and to improve long term fiscal planning. For the year ending March 31, 2002 an amount of $100.0 million was transferred from the Consolidated Fund to the Fiscal Stabilization Fund. Any such transfers into the Fiscal Stabilization Fund are authorized by an appropriation in accordance with the Financial Administration Act. Transfers out of the Fund may be made with the approval of the Lieutenant-Governor-in-Council. No transfers out of the Stabilization Fund were made during the 2002 fiscal year. Volume 1 of the public accounts are subject to review by the Auditor General, an official responsible under the provisions of the Auditor General Act for the examination of the accounts of the Province and for reporting thereon annually to the Legislative Assembly. 18 For each fiscal year, the Minister of Finance delivers a budget and the Estimates of Revenue and Expenditure (the "Budget Estimates") to the Legislative Assembly. As part of the Province's financial reporting system, the Minister of Finance reports on the status of the budget plan during the year. The Budget Estimates include the revenue and expenses of some Provincially-created Boards, Commissions and Crown corporations, or the net profits of such entities, or the Provincial contribution towards the operations of such entities, as well as funds advanced through such entities to various individuals and enterprises in the form of repayable loans and investments. During the fiscal year ended March 31, 1995, the Province adopted the recommendations of the Public Sector Accounting and Auditing Board of the Canadian Institute of Chartered Accountants ("CICA") with respect to the definition of the Reporting Entity. The Provincial Reporting Entity is comprised of certain organizations that are accountable to the Provincial Legislature. Transactions and balances of these organizations are included in the Province's financial statements through different accounting methods as outlined in Note 1(a) of Volume 1 of Public Accounts. In May 1993, An Act Respecting the Balancing of the Ordinary Expenditures and Ordinary Revenues of the Province was enacted. The Act, which was amended in April 1995 and renamed the Balanced Budget Act, states that "It is the objective of the Government of New Brunswick that (a) in respect of the first fiscal period, the total amount of the ordinary expenditures for that fiscal period not exceed the total amount of the ordinary revenues for that fiscal period, and (b) in respect of each subsequent fiscal period, the total amount of the expenditures for that fiscal period not exceed the total amount of the revenues for that fiscal period". The first fiscal period under the Act was the three fiscal years ended on March 31, 1996. Subsequent fiscal periods will consist of four consecutive fiscal years with the first such period having ended on March 31, 2000. For the balanced budget period 1996-97 to 1999-00, the Province did not meet the requirements of the Balanced Budget Act. The cumulative difference between total expenditures and total revenues during the period was a deficit of $1,236.5 million. Major factors explaining the result are the booking of a $450 million write down of New Brunswick Power Corporation asset values in 1998-99 and recognition of the total net present value of the Fredericton-Moncton Highway, $903.8 million, as a result of eliminating the tolls in March 2000 and the consequent change in the lease arrangement from an operating to a capital lease. As at March 31, 2002 revenues of the Province of New Brunswick exceed expenditures by $259.6 million for the balanced budget period of 2000-01 to 2003-04. 19 Changes in Cash Flow The following table sets forth the changes in cash flow of the Province for the four fiscal years ended March 31, 2002 and the Budget Estimates for the fiscal year ending March 31, 2003.
Comparative Statement of Cash Flow (millions of dollars) Budget Estimates1 ----------- -------------- ---------- ------------ ------------ 1999 2000 2001 2002 2003 (1) ----------- ------------ ---------- ------------ ------------ Operating Activities (Increase) Decrease in Net Debt for the Year(2) $ (199.7) $ (931.1) $ 115.8 $ 143.8 $ (58.7) Non-Cash Items Amortization of Premiums, Discounts and Issue Expenses 6.7 7.7 7.8 7.5 8.3 Foreign Exchange Expense 47.0 27.2 44.5 56.7 --- Increase in Allowance for Doubtful Accounts 87.0 46.5 65.3 43.2 25.4 Sinking Fund Earnings (226.5) (203.6) (220.0) (230.9) (240.0) Actual Losses Due to Foreign Exchange (22.6) (14.8) (20.5) (23.7) Decrease in Pension Liability (290.0) (176.7) (153.3) (70.1) --- Increase (Decrease) in Deferred Revenue (245.7) 0.1 (15.6) (39.1) Capital Asset Acquisition Charged to Operations 286.2 1,160.3 154.6 198.8 --- Proceeds from Disposal of Capital Assets (4.1) (3.0) (2.1) (2.4) --- Decrease (Increase) in Working Capital 60.9 (13.2) (75.8) 5.6 --- ----------- ------------ ---------- ------------ ---------- Net Cash from (used in) Operating Activities (500.8) (100.6) (99.3) 89.4 (265.0) ----------- ------------ ---------- ------------ ---------- Investing Activities Purchase of Capital Assets (286.2) (1,160.3) (154.6) (198.8) --- Proceeds from Disposal of Capital Assets 4.1 3.0 2.0 2.4 --- (Increase) Decrease in Investments, Loans and Advances 449.3 (20.5) 62.0 (62.2) (69.6) ----------- ------------ ---------- ------------ ---------- Net Cash from (used in) Investing Activities 167.2 (1,177.8) (90.6) (258.6) (69.6) ----------- ------------ ---------- ------------ ---------- Financing Activities Cash Proceeds of Funded Debt Issued 794.8 576.1 648.0 663.2 --- Received from Sinking Fund for Redemption of Debentures and Payment of Exchange 77.5 78.8 128.0 120.6 --- Increase (Decrease) in Obligations under Capital Leases (0.5) 871.5 (0.7) (28.1) Sinking Fund Installments (104.2) (107.4) (112.7) (118.4) --- Serial Redemptions and Capital Loan Repayments (2.4) (1.2) 0.0 0.0 --- Funded Debt Matured (418.3) (313.8) (502.0) (335.6) --- -------------- -------------- ------------ -------------- ------------ Net Cash from Financing Activities 346.9 1,104.0 160.6 301.7 --- -------------- -------------- ------------ -------------- ------------ Increase (Decrease) in Cash Position during Year 13.3 (174.4) (29.3) 132.5 --- Cash Position - Beginning of Year (294.4) (281.1) (455.5) (484.8) --- -------------- -------------- ------------ -------------- ------------ Cash Position - End of Year $ (281.1) $ (455.5) $ (484.8) $ (352.3) --- ============== ============== ============ ============== ============ Cash Represented by Bank Advances and Short Term Borrowing $ (281.1) $ (455.5) $ (484.8) $ (352.3) --- (1) The Budget Estimates do not include estimates of total borrowing requirements of the Province and New Brunswick Power Corporation. For information with respect to financial requirements of the Province and New Brunswick Power Corporation and with respect to maturing debt of the Province, see "Financing-Financial Requirements", "New Brunswick Power Corporation-Financial Requirements" and "Financing-Funded Debt Maturity Schedule", respectively. 2For further information see Table IV in "Tables and Supplementary Information of the Province." (---)Denotes no estimate provided.
20 2002 Budget Estimates For the fiscal year ended March 31, 2002, the Surplus for fiscal policy purposes was $43.8 million. This was after providing for the allocation to the Fiscal Stabilization Fund of $100 million. The surplus resulting in a decrease in net debt for the year was $143.8 million. The change of $109 million from the Budget Estimate of $34.8 million, was the result of revenue being $146.2 million higher than budget, while expenditures were $37.2 million above budget. Major Sources of Ordinary Account Revenue The major sources of ordinary account revenue for the Province are income taxes, consumption taxes, property taxes and payments from the Federal Government. For the fiscal year ending March 31, 2003, the Province's revenue is estimated at $4,830.3 million, 0.0 % growth from the fiscal year ending March 31, 2002. Overall, there is a projected decrease of $0.3 in revenue. The principal factors that have increased or decreased are the following: a decrease in Federal Payments ($116.2 million) and a decrease in Corporate Taxes ($38.1 million) which are offset by an increase in Consumption Taxes ($65.4 million), an increase of net income from Other Agencies ($70.1 million) and an increase in Personal Income Tax ($12.5 million). The following table shows the percentage sources of ordinary account revenue for the four fiscal years ended March 31, 2002 and the Budget Estimates for the fiscal year ending March 31, 2003.
ORDINARY ACCOUNT REVENUE SOURCES Year ended March 31,Annual ----------------------------------------------------------- Compound Budget Annual Estimates Growth 1999 2000 2001 2002 2003 1999-03 ------ ------ ------ ------ ------ --------- Taxes Personal Income 19.2 20.4 20.3 18.8 19.1 4.3 Corporate Income 3.8 4.1 4.9 4.8 4.0 6.1 Consumption 20.0 18.6 19.9 18.9 20.3 4.8 Property 5.9 5.9 6.2 6.1 6.2 5.8 Miscellaneous 0.6 0.6 0.6 0.6 0.6 3.5 --- --- --- --- --- Total Taxes 49.5 49.6 51.9 49.2 50.2 4.8 ---- ---- ---- ---- ---- Other Revenue Licenses, Permits and Fees 4.2 4.1 4.0 3.7 3.7 0.9 Federal Government Payments 50.7 40.0 39.5 41.4 39.0 (2.2) Other Agencies (6.7) 3.9 2.2 3.7 5.1 -- Miscellaneous 2.3 2.4 2.4 2.0 2.0 0.9 ----- ----- ----- ----- ----- Total Revenue 100.0 100.0 100.0 100.0 100.0 ===== ===== ===== ===== ===== Total Ordinary Account Revenue (in millions) $4,055.0 $4,418.0 $4,481.2 $4,830.6 $4,830.3 4.5 ======== ======== ======== ======== ======== Personal and Corporate Income Taxes. New Brunswick's provincial personal and corporate income taxes are collected and administered by the federal government under a federal-provincial tax collection agreement. For the taxation years up to and including 1999, personal income tax was calculated as a percentage of federal income tax. Effective January 1, 2000, the Province adopted a tax on taxable income' method of calculating provincial personal income tax. This method gave New Brunswick personal income tax policy flexibility to help ensure the tax system addresses the government's social, economic and fiscal objectives.
21 The 2001-2002 Budget contained a number of significant personal income tax reductions. For the 2001 taxation year, New Brunswick's provincial tax brackets and non-refundable credit amounts were increased to equal the new federal tax brackets and non-refundable credit amounts. The Province also introduced indexation for both tax brackets and personal non-refundable credit amounts. The 2001-2002 Budget eliminated the high-income surtax on provincial tax in excess of $13,500, and in its place, introduced a new bracket for taxable income over $100,000. The amounts used for tax brackets and personal non-refundable credits are indexed to the federally indexed amounts and therefore automatically increased by an additional 3% effective January 1, 2002. Provincial Personal Income Tax Rates and Brackets 2001 Taxation Year 2002 Taxation Year 9.68% on first $30,754 9.68% on first $31,677 14.82% on $30,754 to $61,509 14.82% on $31,677 to $63,354 16.52% on $61,509 to $100,000 16.52% on $63,354 to $103,000 17.84% over $100,000 17.84% over $103,000 In the 2001-02 Budget, the Province introduced a low-income tax reduction for single tax filers whose income is less than $15,200 and for families with incomes less than $20,400. The low-income tax reduction was increased for the 2002 taxation year to include single tax filers with incomes less than $17,520 and families with incomes less than $24,040. As in previous years, eligible low-income families with dependent children may also receive the New Brunswick Child Tax Benefit and the New Brunswick Working Income Supplement, depending upon their level of income. The corporate income tax is calculated as a percentage of corporate taxable income as defined for federal tax purposes. The 2001-2002 Budget reduced the general corporate income tax rate from 17% to 16% of corporate taxable income, effective January 1st, 2001. The small business corporate income tax rate, which applies to small Canadian controlled private corporations, was decreased from 4.5% to 4% effective January 1, 2001. In addition, the small business threshold to which this rate applies was increased from the first $200,000 to the first $300,000 of active business income. New Brunswick offers a 10% non-refundable Research and Development Tax Credit for expenditures that are eligible for the federal Scientific Research and Experimental Development Tax Credit. Also, New Brunswick offers a 40% refundable Film Tax Credit. The credit is applied to eligible wages and salaries paid to New Brunswick residents. Capital Taxes. Effective April 1, 1997, the Province introduced a large corporations capital tax, applied to taxable capital in excess of $5 million at a rate of 0.3%. The Large Corporations Capital Tax applies to the same definition of taxable capital as the federal Large Corporations Tax but does not apply to federally defined financial institutions. For banks, loan companies and trust companies, New Brunswick applies a capital tax on capital assets in excess of $10 million at the rate 3%. The capital tax on financial institutions is administered by the Province. Both the Large Corporations Capital Tax and the Financial Corporations Capital Tax are deductible for federal and provincial corporate income tax purposes. Harmonized Sales Tax. Effective April 1, 1997, New Brunswick eliminated its provincial retail sales tax and adopted a harmonized sales tax (HST) of 15%. The HST is a value-added tax and is composed of the federal 7% goods and services tax (GST) and a provincial component of 8%. The federal government administers the HST. The tax adopts the federal GST base and therefore applies to all goods and services subject to tax under the federal Excise Tax Act. Under the HST, businesses receive full input tax credits for tax paid on business purchases. As with the federal GST, the HST provides the same tax-free status for certain goods offered under the GST (e.g. basic groceries). In addition, a number of rebates and credits are available. Books receive a point of sale rebate on the 8% provincial portion of the HST. Matching federal rebate programs, the Province provides partial rebates on the provincial portion of the HST for municipalities, charities and non-profit organizations in respect of tax payable that is not otherwise recoverable. New Brunswick also participates in the Foreign Visitor Rebate Program. As well, the Province offers HST rebates to universities for qualifying research and development projects. Gasoline and Motive Fuel Tax and Tobacco Tax. The provincial gasoline and motive fuel tax rates increased effective December 7th, 2001 from 10.7 to 13.0 cents per litre for gasoline and from 13.0 to 15.4 cents per litre for diesel fuel. New Brunswick tobacco taxes increased effective November 2nd, 2001, from 6.00 to 7.25 cents per cigarette, from 4.20 to 4.95 cents per tobacco stick and from 3.24 to 3.99 cents per gram of fine cut tobacco. 22 Property Taxes. New Brunswick levies a provincial real property tax of $1.50 per $100 of assessment on residential property that is not occupied by the owner. A provincial property tax rate of 65 cents per $100 of assessment is applied to owner-occupied residential property in unincorporated areas. The Province also levies a property tax on non-residential property, at a rate of $2.25 per $100 of assessment. In addition to the residential and non-residential property tax rates, the Province applies a cost of assessment levy of 2 cents per $100 of assessment on real property. Municipal taxes are imposed to defray the cost of providing local services that are not provided by the Province. Municipal taxes are collected by the Province and, in the case of incorporated municipalities, are remitted back to the municipality. In unincorporated areas the tax is retained, and the services are paid for by the Province. The Province offers a low-income property tax allowance of up to $200 for families with taxable incomes of $20,000 or under. FEDERAL-PROVINCIAL FISCAL ARRANGEMENTS The Federal-Provincial Fiscal Arrangements Act was most recently amended in June 2001 to remove the ceiling on equalization payments for the 1999-2000 fiscal year. The Equalization Program is now set for the period ending March 31, 2004. The Canada Health and Social Transfer ("CHST") formula has been established through March 31, 2006. Fiscal Equalization Payments. New Brunswick is one of eight provinces to receive fiscal equalization payments from the Federal Government to assist them in providing a reasonably comparable level of public services at reasonably comparable levels of taxation. The program is intended to bring the per capita revenue-raising capacity of the province up to the per capita revenue-raising capacity of the five provinces used as the standard (British Columbia, Manitoba, Ontario, Quebec and Saskatchewan). New Brunswick's equalization payment for the fiscal year ended March 31, 2002 was $1,321.3 million and for the fiscal year ending March 31, 2003 is estimated at $1,202.0 million. Fiscal equalization payments accounted for 27.4% of the total ordinary account revenue for the fiscal year ended March 31, 2002 and for 24.9% of the estimated total ordinary account revenue budgeted for the fiscal year ending March 31, 2003. Canada Health and Social Transfer. The 1995 Federal Budget announced that effective for the fiscal year ending March 31, 1997, the major social transfers to the provinces, under Canada Assistance Plan ("CAP") and Established Programs Financing ("EPF") would be restructured. CAP and EPF have been replaced by the CHST, a block grant in support of social programs including health, post-secondary education and social services. The total CHST cash block, including notionally allocated CHST trust funds announced in the 1999 and 2000 federal budgets, is estimated to be $18.3 billion in 2001-02. Provinces can draw down their share of the trusts, as they see fit, over the designated time period. The Province's CHST revenue for the fiscal year ended March 31, 2002 was $494.9 million and is estimated at $494.4million for the fiscal year ending March 31, 2003. CHST payments accounted for 10.2% of the total ordinary account revenue for the fiscal year ended March 31, 2002 and for 10.2% of the estimated total ordinary account revenue budgeted for the fiscal year ending March 31, 2003. Fiscal Stabilization Program. Under the Fiscal Stabilization Program, the Federal Government may make unconditional payments to a province when total revenues of that province, as per the federal definition, fall short of the previous years total due to a downturn in economic activity. Revenue Guarantee Program. The Revenue Guarantee Program guarantees cash payments to a province if Federal income tax changes result in a 1% or greater decline in that province's personal income tax base. This program is under review, given the move by provinces from "tax on tax" to "tax on income" method of calculating provincial personal income tax. MAJOR ORDINARY ACCOUNT EXPENDITURE For the fiscal year ending March 31, 2002 the Province budgeted ordinary account expenditure of $4,709.6 million, 5.5% higher than the actual ordinary expenditures for the fiscal year ended March 31, 2001. The net increase of $246.9 million is a result of various increases, including funding for health care, salaries, debt servicing costs, education, economic development, offset by various Program Service Review reductions (such as administrative efficiencies) and savings resulting from a reduced Income Assistance caseload. 23 The following table shows the percentage distribution of ordinary account expenditure for the four fiscal years ended March 31, 2002 and the Budget Estimates for the fiscal year ending March 31, 2003.
ORDINARY ACCOUNT EXPENDITURE DISTRIBUTION Fiscal Year Ended March 31, Budget Estimates 1999 2000 2001 2002 2003 ---- ---- ---- ---- ---- Economic Development 9.9 % 3.5 % 2.8 % 3.0 % 2.4 % Education 19.8 18.7 18.0 18.3 19.1 Employment Development & Labour --- 4.6 4.4 4.1 4.2 Family and Community Services 8.9 14.8 14.3 14.1 14.2 Health 33.4 27.3 28.1 28.8 29.0 Municipal Affairs 3.0 --- --- --- --- Protection Services 2.5 2.9 2.7 2.6 2.6 Resource Sector --- 3.0 3.0 2.7 2.7 Transportation 3.5 3.3 3.2 3.1 3.0 Central Government 4.4 8.0 9.5 9.8 8.9 Service of the Public Debt 14.6 13.9 14.0 13.5 13.9 -------------- ------------- -------------- -------------- -------------- Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % ============== ============= ============== ============== ============== Total Expenditure in Millions $ 4,214.8 $ 4,409.1 $ 4,562.7 $ 4,832.9 $ 4,932.4 ============== ============= ============== ============== ==============
Economic Development. The Economic Development expenditure of $118.8 million represents 2.4% of the total budgeted expenditure for the fiscal year ending March 31, 2003 and is made up of the Departments of: Business New Brunswick ($30.8 million), the Regional Development Corporation ($49.5 million), Tourism and Parks ($23.6 million); and a portion of General Government ($14.9 million). Education. Operating expenses of elementary and secondary schools are paid by the Province. For the fiscal year ending March 31, 2003, expenditure on education for public schooling is estimated at $763.4 million, 15.5% of total budgeted expenditure. The Province also pays operating grants to universities estimated at $180.3 million, 3.6% of total budgeted expenditure, for the fiscal year ending March 31, 2003. Employment Development & Labour. The Employment Development and Labour expenditure of $205.2 million represents 4.2% of the total budgeted expenditure for the fiscal year ending March 31, 2003 and is made of the Departments of Training and Employment Development ($204.6 million) and a portion of General Government ($.6 million). Family and Community Services. The Province provides an income security program which includes payments to social assistance clients, the disabled, and residents of special care homes. Funds are also budgeted for exit-related programs. In addition, the Province assists individuals and families in the acquisition and/or retention of suitable accommodations for reasonable and affordable cost. For the fiscal year ending March 31, 2003, the Province budgeted $699.1 million for Income Assistance, 14.2% of total budgeted expenditure. Health. The Province pays the operating expenses of approved public hospitals to cover the cost of hospital services supplied by such hospitals. The Province also operates a comprehensive medical services payment plan (Medicare), which covers the costs of eligible medical services incurred by registered residents. For the fiscal year ending March 31, 2003, expenditure on health services is estimated at $1,430.2 million, 29.0% of total budgeted expenditure. Protection Services. The Protection Services expenditure of $128.7 million represents 2.6% of total expenditure budgeted for the fiscal year ending March 31, 2003 and is made up of the Department of Justice ($40.3 million), the Department of Public Safety ($87.7 million) and a portion of General Government ($.7 million). 24 Resource Sector. The Resource Sector expenditure of $133.0 million represents 2.7% of the total budgeted expenditure for the fiscal year ending March 31, 2003 and is made up of the Department of Agriculture, Fisheries and Aquaculture ($29.3 million), a portion of Environment and Local Government ($14.6 million), Natural Resources and Energy ($88.8 million) and a portion of General Government ($.3 million). Transportation. For the fiscal year ending March 31, 2003, the Province budgeted $148.6 million for the planning, design and maintenance of highways and the operation of ferry services. This represents 3.0% of the total budgeted expenditure. Central Government. The Central Government expenditure of $440.1 million estimated for the fiscal year ending March 31, 2003 represents 8.9% of total budgeted expenditure and is made up of expenditures of the Department of Finance ($81.0 million), the Department of Supply and Services ($87.5 million), a portion of Environment and Local Government ($36.6 million), General Government ($202.5 million) and other central agencies ($32.5 million). Service of the Public Debt. For the fiscal year ending March 31, 2003, the estimate of $685.0 million for servicing the debt of the Province, including interest, foreign exchange, amortization and other debt management expenses, represents 13.9% of the total budgeted expenditure. NET CAPITAL EXPENDITURES Expenditures for physical assets are financed primarily by borrowing, and are charged to operations as incurred. The following table shows the percentage distribution of gross capital expenditure for the four fiscal years ended March 31, 2002 and the Budget Estimates for the fiscal year ending March 31, 2003. The table also shows the total amounts of recoveries through cost-sharing agreements.
CAPITAL EXPENDITURE DISTRIBUTION Fiscal Year Ended March 31, Budget Estimate 1999 2000 2001 2002 2003 ---------- --------- --------- --------- ----------- Highways 54.1 % 60.6 % 52.8 % 52.9 % 58.8 % Bridges 6.0 8.5 8.6 8.2 6.4 Schools 6.2 13.1 21.9 17.0 13.2 Hospitals 3.5 5.7 5.4 6.0 4.5 Land Purchase 19.2 --- --- --- --- Other Public Buildings 2.2 2.5 5.2 6.6 7.4 Other 8.8 9.6 6.1 9.3 9.7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Total Expenditure (in millions) $ 325.2 $ 296.4 $ 153.1 $ 202.9 $ 257.8 Total Recoveries (in millions) $ 41.9 $ 43.0 $ 11.2 $ 19.9 $ 48.0 ---------- --------- --------- --------- ----------- Net Capital Expenditure (in millions) $ 283.3 $ 253.4 $ 141.9 $ 183.0 $ 209.8 ========== ========= ========= ========= ===========
Capital recoveries for the fiscal year ending March 31, 2003 are estimated at $48.0 million, of which $47.3 million are recoveries from the Federal Government. As of March 31, 2002, the Province and the Federal Government had entered into 27 sub-agreements under the Regional Economic Development Agreement. These agreements involve expenditures in excess of $1,118.2 million of which the Federal Government will contribute a total of approximately 65.1%. During the fiscal year ended March 31, 1999, an amendment was made to the Highway Improvement Program providing for expenditures of $300.0 million of which the Federal Government will contribute 50%. As of March 31, 2002 the Province had spent $153.0 million and recovered $74.3 million from the Federal Government. 25 SPECIAL PURPOSE ACCOUNT Special purpose account revenue is all revenue designated for special purpose by donor trust funds or by legislation. For the fiscal year ending March 31, 2003, such revenue is estimated to be $32.7 million and expenditures from the various accounts are estimated to be $31.2 million for a surplus of $1.5 million. SPECIAL OPERATING AGENCIES Revenue may be generated by the Special Operating Agencies or from transfers from other budgetary accounts. Expenditures are incurred by the agencies in delivering the programs they offer and may be of a capital or operating nature. For the fiscal year ending March 31, 2003, revenue is estimated at $187.3 million from the various agencies and expenditures at $175.7 million for a surplus of $11.6 million. LOANS AND ADVANCES The Province has followed a policy of promoting economic development through the provision of financial assistance to industry. Such assistance has been channeled principally through the Department of Business New Brunswick, the Department of Family and Community Services and Provincial Holdings Ltd. and may take the form of repayable loans, guarantees of bank loans and bond issues and equity investments. Funds required for repayable loans and advances are appropriated annually by the Legislative Assembly and are included in the Province's annual borrowing requirements. Allowances for doubtful or uncollectable amounts are reviewed annually and the net balances of loans and advances less allowances are reflected in the Province's accounts. See "Tables and Supplementary Information of the Province--Table V" for information concerning loans and advances for the four fiscal years ended March 31, 2002 and the Budget Estimates for the fiscal year ending March 31, 2003. Business New Brunswick. The Minister of Business New Brunswick is responsible for assistance provided under the Economic Development Act, the Agricultural Development Board and the Fisheries Development Act: The Economic Development Act authorizes the Minister to provide financial assistance to aid and encourage the establishment or development of industry on such terms and conditions as are specified by the Lieutenant-Governor in Council. At March 31, 2002 loans and guarantees under the Economic Development Act amounted to approximately $177.4 million. The allowance for doubtful accounts on these loans and guarantees amounted to $73.8 million. The Agriculture Development Board provides aid to farmers and farm-related businesses by way of loans, grants and loan guarantees to increase income and employment in rural areas of the province. At March 31, 2002 loans and guarantees outstanding were $20.3 million. The allowance for doubtful accounts totaled $12.4 million. The Fisheries Development Act provides financial assistance mainly by way of direct loans of fishermen to purchase and operate fishing vessels and equipment. At March 31, 2002, loans and guarantees outstanding amounted to $62.8 million. The allowance for doubtful accounts totaled $45.2 million. Family and Community Services. The Department of Family and Community Services carries out the Government's housing policies. Loans are issued pursuant to the New Brunswick Housing Act. At March 31, 2002 loans under the New Brunswick Housing Act amounted to $30.9 million. The allowance for doubtful accounts on these loans totaled $2.5 million. In accordance with the recommendations of the Canadian Institute of Chartered Accountants, loans that will be repaid through future Provincial appropriations were expensed at the time of issue. Provincial Holdings Ltd. Provincial Holdings Ltd. ("PHL") is a New Brunswick company which the Province uses to invest in the equity of industrial enterprises that are based in the Province. "PHL" is wholly-owned by the Province, and at March 31, 2002, $8.5 million had been advanced to "PHL" by the Province. The allowance for doubtful accounts on the loans to "PHL" totaled approximately $2.2 million. 26 FINANCING Borrowing Requirements The following table provides information on the Province's ordinary account deficit or surplus, deficit or surplus from operations and increase or decrease in net debt for the four fiscal years ended March 31, 2002 and the Budget Estimates for the fiscal year ending March 31, 2003.
(INCREASE) DECREASE IN NET DEBT Year Ended March 31, _______________________________________________________________ Budget Estimates 1999 2000 2001 2002 2003 ---- ---- ---- ---- ---- (millions of dollars) Ordinary Account Revenue $4,055.0 $4,418.0 $4,481.2 $4,830.6 $4,830.3 Ordinary Account Expenditure 4,214.8 4,409.1 4,562.7 4,832.9 4,932.4 ------- ------- ------- ------- ------- Surplus (Deficit) on Ordinary (159.8) 8.9 (81.5) (2.3) (102.1) ------- ---- ------ ----- ------- Account Capital Account Expenditure 325.2 296.4 153.1 202.9 257.8 Capital Account Recoveries 41.9 43.0 11.2 19.9 48.0 ---- ---- ---- ---- ---- Net Capital Expenditure 283.3 253.4 141.9 183.0 209.8 ----- ----- ----- ----- ----- Special Purpose Account Revenues 47.7 42.8 41.5 38.2 32.7 Special Purpose Account Expenditures 39.0 35.5 34.8 34.6 31.2 ---- ---- ---- ---- ---- Surplus (Deficit) on Special 8.7 7.3 6.7 3.6 1.5 Purpose Account Special Operating Agency Revenues 184.6 175.9 170.1 187.8 187.3 Special Operating Agency Expenditures 179.3 176.7 164.1 190.5 175.7 ----- ----- ----- ----- ----- Surplus (Deficit) on Special 5.3 (0.8) 6.0 (2.6) 11.6 --- ----- --- ----- ---- Operating Agency Sinking Fund Earnings 226.5 203.6 220.0 230.9 240.0 ----- ----- ----- ----- ----- Elimination of Inter-Account Transactions --- --- --- 1.1 --- Adjustments on Consolidation 2.9 7.1 106.5 96.1 --- Surplus (Deficit) from operations (199.7) (27.3) 115.8 143.8 21.3 Unusual Item --- 903.8 --- --- --- (Increase) Decrease in Net Debt $(199.7) $(931.1) $115.8 $143.8 $(58.7) ======== ======== ====== ====== =======
Net loans and advances, sinking fund installments and serial redemptions and the difference between the cash contributions made to the pension funds and the amounts expensed according to CICA recommendations are not included since they are non-budgetary items. Borrowing requirements associated with the budget and the aforementioned items for the fiscal year ended March 31, 2002 were $454.8 million and for the fiscal year ending March 31, 2003 are estimated at approximately $315.8 million. 27 NON-PUBLIC BORROWING The Province has borrowed from two non-public sources, the Canada Pension Plan ("CPP") and the Federal Government. The CPP is a compulsory national pension plan in which all provinces other than Quebec participate. When the Plan generates surpluses, the excess funds are invested in capital markets. In the past, funds were invested in non-marketable securities issued by participating provinces, provincially guaranteed Crown Corporations and the Federal Government at a rate based on the Federal Government's long-term public market borrowing costs. Changes to CPP legislation in 1998 allowed for new funds flowing into the CPP to be invested in domestic and foreign equities and for provincial bonds previously issued to the CPP Investment Fund to be rolled over upon maturity on a one-time basis at a cost equal to the province's market rates. At March 31, 2002, New Brunswick had outstanding borrowings from the CPP Investment Fund of $834.3 million. Monies borrowed from the Federal Government by way of capital loans have been made available to the Province under programs designed to create employment through construction of capital works projects by the Province and by municipalities. At April 1, 2000, the Province had no further outstanding borrowings from the Federal Government under this program. PUBLIC BORROWING At March 31, 2002, the Province had outstanding borrowings for Provincial purposes from non-Federal sources totaling $7,170.4 million through the issue and sale of debentures and notes, such securities being denominated in Canadian dollars, U.S. dollars, Japanese yen and Swiss francs. Not included in this amount is $3,121.7 million borrowed on behalf of New Brunswick Power Corporation. TREND AND DISTRIBUTION OF BORROWING The trend and distribution of the amounts and sources of the Province's annual debt financing over the past five fiscal years is shown below:
SOURCES OF FUNDS [1] Non-Public Borrowing ------------- Year ended Canada Pension March 31, Public Borrowing Plan Total Borrowing ---------- ---------------- -------------- --------------- (millions of dollars) 1998 $ 950.0 $ 0.0 $ 950.0[2] 1999 800.0 0.0 800.0[3] 2000 550.0 46.9 596.9[4] 2001 600.0 53.0 653.0[5] 2002 600.0 74.8 674.8[6] -------- ------ --------- $3,500.0 $174.7 $ 3,674.7 ======== ====== =========
- -------------------------- [1] Debt securities payable in foreign currencies are expressed as the Canadian dollar equivalent at the time of issue. [2] No funds were borrowed on behalf of New Brunswick Power Corporation. [3] No funds were borrowed on behalf of New Brunswick Power Corporation. [4] In addition, $50.0 million was borrowed on behalf of New Brunswick Power Corporation. [5] In addition, $300.0 million was borrowed on behalf of New Brunswick Power Corporation. [6] In addition, $300.0 million was borrowed on behalf of New Brunswick Power Corporation. Between April 1, 2002 and December 15, 2002, the Province borrowed $1,458.0 million. Of this amount, $466.6 million was advanced to New Brunswick Power Corporation. 28 GROWTH OF FUNDED DEBT AND CAPITAL LOANS The following tables illustrate the rate of change of the Province's outstanding funded debt and capital loans and present certain ratios relating that growth to economic indicators. The following tables do not include $50 million borrowed during the fiscal year 2000, $300.0 million borrowed during the fiscal year 2001 and $300.0 million borrowed during the fiscal year 2002 on behalf of New Brunswick Power Corporation. The Province is required by legislation to pay annually into a sinking fund the Canadian currency equivalent of not less than 1% of all funded debt. The Province's current policy is to pay 1.5% of funded debt annually into the sinking fund. Sinking fund installments are invested in approved securities, including direct and guaranteed obligations of the Province. Interest earned on such investments is added to the sinking fund, and is reinvested in approved securities. At March 31, 2002 the value of the sinking fund applicable to debt issued for Provincial purposes amounted to $3,358.8 million. For the fiscal year ended March 31, 2002, earnings on investments amounted to $230.9 million.
OUTSTANDING NET FUNDED DEBT AND CAPITAL LOANS NET FUNDED CHANGE GROWTH FUNDED DEBT(1) VALUE OF DEBT AND OVER AT CANDADIAN UNITED STATES JAPANESE SWISS CAPITAL SINKING CAPITAL PREVIOUS MARCH 31, DOLLARS DOLLARS YEN FRANCS LOANS TOTAL[2] FUNDS LOANS YEAR % - --------- --------- ------------ -------- ------ ------- -------- -------- ---------- -------- (Millions of units of currency) US Dollars 1998 4,995.2 US$949.5 12,000.0Sfr 230.0 $3.6 $6,685.1 $2,440.0 $4,245.1 1.9 1999 5,395.9 933.5 12,000.0 230.0 1.2 7,194.0 2,693.2 4,500.8 6.0 2000 5,728.7 933.5 12,000.0 175.0 0.0 7,408.5 2,925.5 4,483.0 (0.4) 2001 5,956.2 933.5 10,872.0 100.0 0.0 7,656.2 3,130.2 4,526.0 1.0 2002 6,305.4 933.5 9,744.0 100.0 0.0 8,004.7 3,358.8 4,645.9 2.6
- ------------ 1 Debt securities issued in foreign currencies, which have been hedged are reported in the currency into which they have been hedged at the rates of exchange established by such hedges. 2 Debt securities payable in foreign currencies are expressed as the Canadian dollar equivalent at fiscal year end rates of exchange or, where hedges are in place, at the rates of exchange established by such hedges. After a review of the sinking fund during the fiscal year ended March 31, 1991, the Province determined that due to the high level of investment earnings and sinking fund management policies the asset value was in excess of the amount required to provide for the orderly retirement of the outstanding debt. Pursuant to section 24 of the Provincial Loans Act, the Minister of Finance authorized the cancellation of certain Province of New Brunswick debentures held as investments by the sinking fund effective April 1, 1991.
COMPARATIVE DEBT STATISTICS[1] 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- (millions of dollars) Gross Domestic Product at market prices $16,845 $17,633 $19,005 $20,008 $20,507 Personal Income 15,118 15,835 16,628 17,436 18,183 Ordinary Revenue 4,067 4,055 4,418 4,481 4,831 Net Funded Debt and Capital Loans 4,245 4,501 4,483 4,526 4,646 As % of Gross Domestic Product 25.2% 25.5% 23.6% 22.6% 22.7% As % of Personal Income 28.1% 28.4% 27.0% 26.0% 25.6% As % of Provincial Revenue 104.4% 111.0% 101.5% 99.5% 96.2% _______________ [1] The figures for Provincial Revenue and Net Funded Debt and Capital Loans are for the fiscal year ended March 31. The figures for GDP and Personal Income are for the calendar year ended December 31 of the previous year.
29
FUNDED DEBT MATURITY SCHEDULE For Securities Outstanding at March 31, 2002 Denominated in [1]: ------------------------------------------------------- Total Canadian United States Japanese Swiss Canadian Year ended March 31, Dollars Dollars Yen Francs Dollars[2] ------------------- -------- -------- ----------- -------- -------- 2003 $ 323.8 US$137.0 Yen 1,128.0 --- $555.7 2004 230.9 --- 1,128.0 --- 244.4 2005 284.5 247.5 1,128.0 --- 692.5 2006 246.1 150.0 1,128.0 --- 498.7 2007 760.5 --- 1,128.0 Sfr100.0 868.7 -------- -------- ----------- -------- -------- 2003-07 1,845.8 534.5 5,640.0 Sfr100.0 2,860.1 2008-12 2,743.2 --- 4,104.0 --- 2,792.5 2013-17 541.7 200.0 --- --- 860.4 2018-22 674.7 99.0 --- --- 832.5 2023-27 --- 100.0 --- --- 159.4 2028-32 500.0 --- --- --- 500.0 -------- -------- ------------ -------- --------- $6,305.4 US$933.5 Yen 9,744.0 Sfr100.0 $8,004.7 ======== ======== ============ ======== ========= - ------------------- 1 Debt securities issued in foreign currencies which have been hedged are reported in the currency into which they have been hedged at the rates of exchange established by such hedges. 2 Debt securities payable in foreign currencies are expressed as the Canadian dollar equivalent at the fiscal year end rates of exchange or, where hedges are in place, at the rates of exchange established by such hedges.
Between April 1, 2002 and December 15, 2002, the Province borrowed $1,458.0 million. Of this amount, $466.6 million was advanced to New Brunswick Power Corporation. The preceding table does not include these amounts. UNFUNDED DEBT Because the Province follows an accrual accounting system, expenditures are allocated to the year in which they were incurred irrespective of the date of payment, resulting in the establishment of accounts payable and accrued liabilities. Such unfunded debt is not secured by debt instruments. At March 31, 2002, the Province's unfunded debt was as follows: UNFUNDED DEBT At March 31, 2002 --------------------- (millions of dollars) Bank Advances and Short Term Borrowing $884.0 Trust Deposits 42.3 Accounts Payable 436.6 Accrued Expenditures 676.0 Deferred Revenue 286.1 -------- Total Unfunded Debt $2,325.0 ======== This unfunded debt is partially offset by assets of the Province in the amount of $1,360.9 million, represented by $531.7 million of cash and short term investments, $285.1 million of accounts and interest receivable, $382.4 million of taxes receivable, $26.8 million of inventories and $134.9 million of prepaid and deferred charges. 30 Contingent Liabilities The following table summarizes outstanding contingent liabilities at March 31, 2002 with comparable numbers for March 31, 2001: CONTINGENT LIABILITIES At March 31, -------------------- 2001 2002 ---- ---- (millions of dollars) Bank Loans Under Various Acts $166.6 $196.1 Less: Provision for Possible Losses 30.9 44.7 ---- ---- Total Contingent Liabilities $135.7 $151.4 ====== ====== Due to the adoption of the definition of the Reporting Entity recommended by the Public Sector Accounting and Auditing Board of the CICA, guarantees associated with the debt of New Brunswick Power Corporation and the New Brunswick Municipal Finance Corporation are not included in the previous table. These guarantees are as follows: At March 31, -------------------- 2001 2002 ---- ---- (millions of dollars) Bonds, Debentures and Notes New Brunswick Power Corporation(1) $125.0 $125.0 New Brunswick Municipal Finance Corporation 350.9 366.9 Loans from Northern Canada Power Commission to New Brunswick Power Corporation 9.6 8.0 --- --- 485.5 499.9 Less: Sinking Funds 30.4 32.2 ---- ---- 455.1 467.7 Accrued Interest(1) 12.1 12.2 ---- ---- Total $467.2 479.9 ====== ===== - ----------------- 1 Foreign denominated debt plus accrued interest are expressed as the Canadian dollar equivalent at fiscal year end rates of exchange. Debt Record The Province has always paid promptly when due the full amount of the principal, redemption premium, if any, and interest on every direct obligation issued by it and every indirect obligation on which it has been required to implement its guarantee, all in the lawful currency of the country where payable at the time of payment thereof, subject during wartime to any applicable restrictions of laws and regulations forbidding trading with the enemy. 31 CONSOLIDATION OF NEW BRUNSWICK PUBLIC SECTOR DEBT Other than the Province, New Brunswick Power Corporation, New Brunswick Municipal Finance Corporation and municipalities are the only public sector entities with outstanding debt. Municipalities, with the exception of the City of Saint John, are required to obtain approval from the Provincial Government before borrowing money for capital expenditures. CONSOLIDATED FUNDED DEBT OF THE NEW BRUNSWICK PUBLIC SECTOR (millions of dollars) Province of New Brunswick Funded Debt $ 8,004.7 Less: Sinking Funds 3,358.8 ------- 4,645.9 Municipalities Funded Debt 366.9 ----- Total Public Sector Debt $ 5,012.8 ========= Information in the foregoing table relative to the Province is at March 31, 2002 and information relative to municipalities is the amount outstanding at December 31, 2001. The figures for the Province do not include contingent liabilities of the Province in respect of its guarantees of obligations of New Brunswick Power Corporation ($100.8 million net of sinking funds of $32.2 million). Also excluded is $2,794.3 million (net of sinking funds of $327.4 million) borrowed by the Province on behalf of New Brunswick Power Corporation. This debt is paid out of the operating revenues of New Brunswick Power Corporation rather than out of Provincial revenues. Between April 1, 2002 and December 15, 2002, the Province borrowed $1,458.0 million. Of this amount, $466.6 million was advanced to New Brunswick Power Corporation. PUBLIC SECTOR PENSION LIABILITIES The Public Service Superannuation Act establishes a plan under which pensions are paid to most government employees and to certain employees of boards or institutions affiliated with the Province or their surviving spouses and minor dependents. Employees contribute approximately 6.1% on average of their salaries into the Public Service Superannuation Fund (PSSF). Approximately 9,700 active Provincial employees are making contributions. The Province and other designated employers are required to contribute into the PSSF an amount that is necessary, in addition to employee contributions, to cover current service cost. If at any time the PSSF is unable to satisfy all pension liabilities, the deficiency will be met out of the ordinary revenue of the Province. The Province contributed $31.4 million as the employer portion of current service cost for the year ending March 31, 2002. The Province will contribute approximately $32.7 million for current service cost for the fiscal year ending March 31, 2003. The market value of the PSSF was $3,027.9 million as of March 31, 2002. The Teachers' Pension Act establishes a plan for the payment of pensions to retired teachers or their surviving spouses and minor dependents. Teachers covered contribute approximately 7.4% on average of their salaries into the Teachers' Pension Fund (TPF). Approximately 7,646 active employees are making contributions. The Province is required to match employee contributions. If at any time the TPF is unable to satisfy all pension liabilities, the deficiency will be met out of the ordinary revenue of the Province. The Province contributed $29.9 million as the employer portion of current service cost for the year ended March 31, 2002. The Province will contribute approximately $31.1 million for the fiscal year ending March 31, 2003. The market value of the TPF was $2,793.3 million as of March 31, 2002. 32 On the basis of April 1, 2000 actuarial valuations, the actuarial surplus as of March 31, 2000 is $330.2 million and $221.1 million for the Public Service Superannuation Plan and Teachers' Pension Plan, respectively. Significant actuarial assumptions used for the purposes of financial statements were: Short Term Long Term --------- --------- Salary escalation rate......................... 2.00% to 3.00% 4.00% Real rate of return............................ 4.25 4.25 Inflation...................................... 3.50 3.50 The financial statements for the Province of New Brunswick report unfounded liabilities for the Public Service Superannuation Plan and the Teachers' Pension Plan of $126.5 million and $197.3 million, respectively as of March 31, 2002. The primary difference between the actuarial and accounting valuations is that accounting standards require that experience gains be amortized over the estimated average remaining lifetime of the employees. The Province sponsors three separate School District pension plans totaling $228.9 million in assets. The Plans have December 31 year ends. The total surplus is approximately $42.6 million on an actuarial basis and $18.9 million on an accounting basis. If at any time these plans are found to be deficient, the Province is required to contribute an amount sufficient to fully fund the obligations. The Province sponsors pension plans for provincial court judges, Members of the Legislative Assembly and the Ombudsman. Collectively they have a total actuarial unfunded liability of $37.7 million and an accounting unfunded liability of $49.6 million as of March 31, 2002. The Province also contributes to the Pension Plan of Certain Bargaining Employees of New Brunswick Hospitals, C.U.P.E. Employees of New Brunswick Hospitals and the Pension Plan for Part-time and Seasonal Employees. The Province contributes a fixed percentage of an employees' wages, and has no further financial obligation. New Brunswick Investment Management Corporation In 1996, legislation was proclaimed establishing the New Brunswick Investment Management Corporation. The corporation acts as trustee for the Public Service Superannuation Plan, the Teachers' Pension Plan, and the Provincial Court Judges' Pension Plans. NEW BRUNSWICK POWER CORPORATION New Brunswick Power Corporation (the "Corporation"), formerly The New Brunswick Electric Power Commission, was established in 1920 under the Electric Power Act which provides that the Corporation is an agent of the Crown in right of the Province. The Electric Power Act states that the objective of the Corporation shall be "to provide for the continuous supply of energy adequate for the needs and future development of the province and to promote economy and efficiency in the generation, distribution, supply, sale and use of power". At March 31, 2002, the Corporation operated six hydro-electric plants with a combined net generating capacity of 884 megawatts, one CANDU nuclear plant at Point Lepreau with a net generating capacity of 635 megawatts, five thermal plants with a combined net generating capacity of 1,923 megawatts and three combustion turbine plants with a combined net generating capacity of 327 megawatts. The Corporation has a total net generating capacity of 3,769 megawatts and its gross generation constitutes 85% of the gross generating capacity in the province.1 Gross investment in all plants at March 31, 2002, was $3,667 million. At March 31, 2002, the Corporation maintained 6,665 kilometers of transmission lines and 26,316 kilometers of distribution lines, representing a gross investment of $272 million and $693 million, respectively. The Corporation also had an investment of $408 million in terminals and substations. 1 Gross generating capacity for the Province is based on 1999 Statistics Canada figures. 33 Interconnections Beginning in the early 1970's, the Corporation significantly enlarged its interconnection facilities to take advantage of its favorable geographic position between the two very large electric power systems in Quebec and New England and the other two Maritime provinces. At March 31, 2002 interconnection capacity was as follows: INTERCONNECTION CAPACITY Utility System Megawatts - -------------- --------- Quebec.......................................................... 1,100 New England .................................................... 810 Nova Scotia..................................................... 500 Prince Edward Island............................................ 200 --- Total........................................................... 2,610 ===== On March 1, 1996, the Corporation was granted two export permits by the National Energy Board for the export of firm and interruptible energy to the U.S. These export permits will remain in effect until December 31, 2006. On December 22, 1999, the Corporation was granted a third export permit for 224 MW for a 20-year period. These export permits have allowed the Corporation to implement a number of transaction agreements with entities not directly interconnected with New Brunswick and increase the range of potential business partners. The Corporation has a number of short-term agreements with neighbouring utilities both in the U.S. and in eastern Canada and other entities for the purchase and sale of energy and capacity. Additional transactions are implemented on an opportunity basis when beneficial to both parties. Competition and Deregulation In January 2001, the Provincial Government's White Paper-New Brunswick Energy Policy outlined a managed restructuring of the electricity sector from the current monopoly structure to a more competitive environment. Many recommendations in the White Paper will have an impact on NB Power's future development and operations: o Beginning April 2003, wholesale and large industrial customers will have the option to obtain electricity from competitive suppliers. Customers leaving the system may be assessed an exit fee or equivalent charge. Market conditions will be reviewed periodically regarding the introduction of retail competition. o For wholesale and large industrial customers that do not select an alternative supplier, NB Power will have an obligation to provide a standard offer of service under terms and prices consistent with previous service. o Provincial legislative restrictions on the construction of generation facilities by independent power producers will be removed. o A Market Design Committee, comprised of many stakeholders, has studied the design, structure and rules for a competitive market. It has forwarded recommendations to the Provincial Government on how to introduce electricity competition and protect the interests of customers and the environment. Work is underway to develop detailed rules for the operation of the market prior to the market opening. o The Board of Commissioners of Public Utilities of New Brunswick ("Public Utilities Board") will have the authority to regulate the open-access transmission tariff in New Brunswick. 34 In early 2002-2003, the Provincial Government decided to maintain NB Power as a Crown Corporation and complete a major restructuring of the utility including the invitation of equity positions or partnerships in the business development projects. By April 1, 2003, NB Power will be restructured into NB Power Holding with the four business units operating as subsidiary companies or stand-alone businesses - NB Power Generation, NB Power Nuclear, NB Power Transmission, and NB Power Distribution/Customer Service. The holding company will provide corporate services to the subsidiaries. The new subsidiary companies will operate on a commercial basis and will be required to: o earn a positive rate of return on equity o pay a cash dividend to the Province o pay the equivalent of income and capital taxes o borrow funds without a Provincial Government guarantee NB Power Transmission will own and operate the transmission system. An Independent System Operator will provide non-discriminatory transmission access to customers inside or outside the province. Natural Gas The availability of natural gas coupled with new transmission access regulations has allowed the Corporation to create partnerships for infrastructure redevelopment. The Corporation's objective is to take advantage of the economic and environmental benefits of natural gas while mitigating competitive impacts. There is the likelihood that export benefits will be reduced as natural gas generation capacity is built in New England. There is also, however, the opportunity to use natural gas to generate electricity in New Brunswick for significant benefits. The Corporation has an agreement with Bayside Power LP where an existing 100 MW unit at Courtenay Bay was re-powered to a 280 MW combined-cycle natural gas unit. The Corporation contributed site infrastructure and has contracted to purchase the electric output during the winter months over a 20-year contract term. The project began commercial operation in September 2001. Business Development Consistent with NB Power's business development plan objectives to ensure the reliability of supply, environmental acceptability, economic efficiency, and financial viability, investment analysis has identified three development projects. These proposed development projects are in various stages of regulatory review, environmental assessments and searches for equity partnerships. Coleson Cove Generating Station Refurbishment The continued operation of the 1000 MW oil-fired Coleson Cove Generating Station beyond 2005 requires an upgrade to meet new environmental standards. The proposed $747 million station refurbishment will include installation of control technologies to reduce emission rates. Significantly lower fuel costs resulting from the conversion of the station to use Orimulsion(R) will finance the acquisition of new environmental protection equipment. NB Power filed evidence supporting the refurbishment with the PUB in November 2001. Following a public hearing in January 2002, the PUB recommended to NB Power's Board of Directors that the project proceed. A provincial environmental impact assessment has been successfully completed. The refurbishment project is scheduled for completion in November 2004. The Corporation is currently seeking an equity position or partnership in the project. Point Lepreau Nuclear Generating Station Refurbishment NB Power has completed an assessment to define the scope and cost for the refurbishment of the 635 MW Point Lepreau Nuclear Generating Station. The proposed refurbishment would require replacement of major equipment during an 18-month outage beginning in 2007, along with the construction of new structures at the on-site waste management facility. The $850 million project would maintain existing production from the station, which provides up to 30% of New Brunswick's electricity, and maintain significant environmental benefits. 35 NB Power filed evidence supporting the refurbishment with the PUB in February 2002. Following a public hearing that ended in June 2002, the PUB recommended to NB Power's Board of Directors that the project not proceed because, in their opinion, there was no significant economic advantage to the proposed project. The PUB made their recommendation based on the economic aspect of the proposed project only. Development criteria such the environmental advantages of the refurbishment, particularly in the area of controlling carbon dioxide emissions were not considered. The PUB had previously determined that the electricity generated by Point Lepreau is required to meet the future needs of the Province. As NB Power reviews this decision, all of the costs and risks of other development options, including the environmental considerations, will be weighed against the overall benefits of nuclear power. Work is also proceeding on the federal environmental impact assessment required for the waste management facility. The Corporation is currently seeking an equity position or partnership in the project. Transmission Projects Increased opportunities for imports and exports to the New England electricity market would be enhanced with the construction of a second 345 kV transmission line and interconnection. NB Power made an application to the National Energy Board (NEB) for a Certificate of Public Convenience and Necessity to construct, operate and maintain the power line. A Comprehensive Study Report of the environmental assessment of the project was submitted to the NEB in March 2002. The project is planned for completion in 2006. Renewable Energy Development NB Power has been exploring wind energy as part of alternative energy development opportunities and has contributed towards the construction of a tower to measure wind speed on Lameque Island in northeastern New Brunswick. Rates Under the Electric Power Act, rates are charged by the Corporation to cover all operating charges and expenses, overhead, interest and amortization charges, and to maintain "such reserve, depreciation and surplus accounts as are maintained by a properly managed corporation". Effective January 1, 1990, the Corporation became subject to rate regulation by the Board of Commissioners of Public Utilities ("Public Utilities Board"). The Lieutenant-Governor in Council may reverse or vary any rate order of the Public Utilities Board. If this occurs there is no appeal. The mandate of the Public Utilities Board does not extend to areas such as approval of borrowings or contracts for the sale or purchase of electricity outside the province. The Public Utilities Act was amended on December 10, 1993 to provide "legislated permission" regulation. Since that date, the Corporation may implement rate increases in any fiscal year without applying to the Public Utilities Board, provided the rate increase does not exceed the greater of 3.0% or the percentage change in the average consumer price index. In addition, the Corporation must, before making any direct capital expenditures for new generating facilities, apply to the Public Utilities Board for its recommendations as to those proposed capital expenditures. The Public Utilities Act was also amended in November, 1997, to require the Corporation to apply to the Public Utilities Board for its recommendations before making any expenditure in excess of $75 million in relation to the decommissioning of a generating facility or a proposed maintenance program or a proposed upgrading program for a generating facility or a combination of such programs for a generating facility. 36 Rate increases in the past five fiscal years are shown in the following table: AVERAGE RATE INCREASES Year Ended March 31, ------------------------------------------- Customer Classification 1998(1) 1999(2) 2000 2001(3) 2002 ------- ------- ---- ------- ---- Residential 3.4% 3.4% 0.0% 3.0% 3.0% General Service 2.3 2.2 0.0 0.0 1.5 Industrial 2.9 2.9 0.0 0.0 1.5 Wholesale 2.9 2.9 0.0 0.0 1.5 Street Lights 0.0 0.0 0.0 0.0 0.0 1) Increase effective October 1, 1997. 2) Increase effective October 1, 1998. 3) Increase effective April 1, 2000. An increase of $1.00 per unit for water heater rentals was implemented effective October 1, 1999. Operations and Financial Review Highlights The financial information which follows is on a consolidated basis for the fiscal year ended March 31, 2002 for the Corporation and its wholly-owned subsidiary, N.B. Coal Limited. NB Power's net income was $20 million in 2001-2002 compared to a net loss of $78 million in 2000-2001. The 2001-2002 net income from operations before a foreign exchange accounting adjustment was $4 million compared to a net loss of $12 million the previous year. The 2001-2002 net income was significantly affected by several factors. During the year, water flows were at the lowest level since the late 1960's and, as a result, hydro generation had to be replaced with more expensive thermal generation. This increased fuel costs by $21 million compared to the previous year. One-time maintenance costs were incurred at three thermal generating stations, the most significant being turbine repairs at the Coleson Cove Generating Station. This unplanned maintenance work, coupled with costs incurred to enhance Customer Service operations and improve information systems functionality, contributed to a $19 million increase in maintenance and administration costs compared to the previous year. These negative pressures on net income were mitigated by substantial gross margins from exports, which reached a record high of $170 million in 2001-2002. As well, the Point Lepreau Generating Station achieved a capacity factor of 82.5%, which was an improvement over the level of 65% achieved in 2000-2001. Accounting Adjustment Effective April 1, 2001, NB Power adopted the Canadian Institute of Chartered Accountants (CICA) amended standard for foreign exchange translation. The amended standard no longer allows foreign exchange gains or losses on long-term debt to be deferred and amortized over the life of the related debt issue. Income and retained earnings from prior years have been restated to reflect the amended standard. The CICA change in accounting standards had a significant impact on reported net income and the Corporation's equity because of its $660 million in US dollar debt. At April 1, 2001, the Corporation had $172 million in unamortized foreign exchange losses related to this US dollar debt. Adoption of the amended standard increased net income by $16 million in 2001-2002 and reduced beginning retained earnings by $172 million. In 2000-2001, the amended standard decreased net income by $66 million and reduced beginning retained earnings by $106 million. In 1999-2000, the amended standard increased net income by $49 million and reduced beginning retained earnings by $154 million. 37 As a result of the amended standard, NB Power has implemented a hedging strategy to mitigate exposure to net income volatility in the future. Operating Results Total revenue amounted to $1,319 million, an increase of $10 million or .8% from the previous year. During the fiscal year ended March 31, 2002, revenues from sales of power in-province decreased by $12 million or 1.3% to $919 million. Weather in 2001-2002 was warmer than the previous fiscal year, which caused a revenue decline in the weather-sensitive customer sectors (residential, general service, and wholesale) of $26 million. Industrial revenue was down $5 million year-over-year as a result of inventory shutdowns and lower production levels primarily in the pulp and paper sector. Industrial and weather-related revenue decreases were partially offset by growth in the residential and general service sectors, which increased revenues by $19 million compared to the previous year. Revenue from residential customers was higher due to an increase in the number of customers, while the increase in the general service sector was due to greater consumption. Out-of-province revenue was $359 million in 2001-2002, an increase of $27 million or 8.1% from 2001, primarily due to a sales volume increase. Despite a decline in on-peak prices, the Corporation did not experience a significant year-over-year difference in the average price earned from the New England market because it utilized a balance of spot price sales and sale contracts based on forward prices. Margins on export sales have kept electricity rates to in-province customers 10-15% lower. For the fiscal year ended March 31, 2002, energy was supplied as follows: Composition Of Energy Supply Total In Province Hydro ...................................................9.1% 12.2% Heavy fuel oil & combustion turbine.....................27.4 17.2 Orimulsion(R)...........................................10.7 10.3 Coal and petroleum coke.................................20.0 22.3 Nuclear.................................................23.5 29.5 Purchases................................................9.3 8.5 ----- ----- Total..................................................100.0% 100.0% ===== ===== The cost of fuel and purchased power was $489 million in 2001-2002, a decrease of $12 million or 2.4% from 2000-2001. Heavy fuel oil represented 50% of this spending, while purchased power from utilities in Nova Scotia, Maine, Quebec, and New Brunswick accounted for 20%. The year-over-year decline in fuel and purchased power costs was attributable to: o In-province load declined by 2.1%, primarily due to warmer weather, which reduced costs by $14 million. o Nuclear net capacity improved, which reduced costs by $44 million. The nuclear station net capacity factor in 2001-2002 was 82.5% compared to 65% in 2000-2001. The more electricity that can be produced from nuclear, the less NB Power must utilize more expensive thermal generation and purchases of power. o Lower heavy fuel oil prices reduced the cost to supply export sales by $11 million and the cost to supply in province load by $5 million. These cost reductions were offset by cost increases: o Lower hydro generation increased costs by $21 million when it was replaced with more expensive thermal generation. Hydro performance was 71.3% of long-term average in 2001-2002 compared to 88.6% in 2000-2001. o The Canadian dollar declined compared to the US dollar which increased fuel costs by $9 million because most thermal fuels are purchased in US dollars. o Coal prices were higher which increased costs to supply in-province load by $11 million. o Due to increased contract prices, purchases to supply in-province load increased $13 million. o Reduced capacity of thermal units and other dispatch changes to supply in-province load increased costs by $8 million. 38 Operations, maintenance and administration costs were $344 million in 2001-2002, an increase of $19 million or 5.8% from 2000-2001. The increase was due to: o Unplanned one-time maintenance costs incurred at the Coleson Cove, Belledune and Dalhousie Generating Stations. The most significant increase was due to turbine repairs at the Coleson Cove Generating Station. o Increased operating costs were incurred in the Customer Service and Transmission Business Units in support of the five-year asset renewal program. o Increased costs were required to support information technology system investments. Amortization and decommissioning costs were $200 million in 2001-2002, a decrease of $5 million or 2.4% from 2000-2001. The decline occurred because the 2000-2001 results included a one-time $7 million write-down of a surplus dragline at NB Coal. In 2001-2002, increases occurred due to investments in generating station assets and a reduction in the service lives of information system assets. Finance charges were $266 million in 2001-2002, a decrease of $90 million or 25.3% from 2000-2001. The change in the foreign exchange translation on long-term US dollar debt caused a decline of $78 million because the Canadian dollar declined by 0.6 cents in 2001-2002 compared to a decline of 5.4 cents in 2000-2001. Interest costs declined by $12 million due to reduction in debt and the replacement of higher interest debt issues with new debt issues at lower interest rates. At March 31, 2002, the net long-term debt of the Corporation was $2,890 million (after deducting all sinking funds and using exchange rates prevailing on that date) compared to $2,869 as at March 31, 2001. All long-term debt is guaranteed or advanced by the Province. Point Lepreau During 2001-2002, Point Lepreau operated with a capacity factor of 82.5%, its second highest performance in six years. Since 1982, the station's in-service capacity factor has been 82% and it has regularly provided approximately 30% of New Brunswick's electricity. There were five unscheduled outages during the year, collectively lasting 44 days and resulting in a lower-than-budgeted capacity factor. Each year the Corporation charges to income an amount to provide for the estimated future costs of disposing of used nuclear fuel and decommissioning the nuclear generating station to return the site to a state of unrestricted use. A study was completed during the year to update costs but in view of the uncertainty relating to the decision on refurbishment that will determine the estimated service life for the station, the Corporation's financial statements continue to reflect the 1996 reviews for purposes of calculating the annual charge for used nuclear fuel management and decommissioning. When the refurbishment decision is made, it is possible that the annual charges to income for used nuclear fuel management and decommissioning and its amortization will differ, and could differ materially, from the estimated amounts provided in the 2001-2002 financial statements. The estimated impact on 2001-2002 is described in detail in Note 1(n) of the Corporation's financial statements. The amounts for used nuclear fuel management and decommissioning at March 31, 2002 were not funded. The Corporation is currently investigating funding options for implementation during the 2002-2003 fiscal year. Capital Expenditures Capital expenditures were $140 million in 2001-2002, an increase of $22 million or 18.6% from 2000-2001. The capital expenditures included pre-engineering analysis and other work required for a decision on refurbishment of the Point Lepreau Generating Station. Other capital expenditures included preparatory work to support the Coleson Cove Generating Station refurbishment project and various projects to strengthen transmission and distribution system infrastructure. Free Cash Flow and Debt Reduction Free cash flow was $64 million in 2001-2002, a decrease of $50 million or 43.9% from 2000-2001. Free cash flow is the operating cash flow less capital expenditures plus proceeds on disposals of assets, customer contributions for capital expenditures and changes in working capital. The reasons for the decline in free cash flow were higher capital spending and higher working capital due to fuel inventory at fiscal year end. 39 Debt reduction was $41 million in 2001-2002, an increase of $18 million or 78.3% from 2000-2001. The decline in free cash flow of $50 million was more than offset by the change in the foreign exchange translation of long-term US dollar debt. The Canadian dollar compared to the US dollar declined by 5.4 cents in 2000-2001 while the corresponding decline in 2001-2002 was 0.6 cents. Statistical Information The following table sets forth certain information with respect to the peak demand and capacity for each of the fiscal years 1998 through 2002. PEAK DEMAND AND CAPACITY Year Total Total Net Generating Ended In-Province Out-of Province Peak Capacity and Firm March 31, Peak Demand Firm Sales(1) Demand Capacity Purchases(1) - -------- ----------- --------------- ------ --------------------------- (megawatts) 1998 2,792 492 3,284 4,168 1999 2,786 531 3,317 4,468 2000 2,856 427 3,283 4,468 2001 2,893 464 3,357 4,267 2002 2,768 863 3,631 4,268 - -------------------- (1) At the time of the In-province Peak Demand. 40 The following table sets forth certain statistical information for the five fiscal years ended March 31, 2002.
SELECTED OUTPUT AND SALES DATA Year Ended March 31, ------------------------------------------------------------------- 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- System Power Generated and Purchased (in millions of kilowatt-hours) Generated 17,242 20,099 17,123 18,818 19,067 Purchased 3,148 2,568 4,712 2,092 1,945 ------ ------ ------ ------ ------ 20,390 22,667 21,835 20,910 21,012 Losses and Internal Use 1,895 2,070 1,993 2,021 1,953 ------ ------ ------ ------ ------ Total Energy Available 18,495 20,597 19,842 18,889 19,059 ====== ====== ====== ====== ====== Electric Sales (in millions of kilowatt-hours) In-Province 13,724 13,549 13,587 14,011 13,795 Out-of-Province 4,771 7,048 6,255 4,878 5,264 ------ ------ ------ ------ ------ Total Electric Sales 18,495 20,597 19,842 18,889 19,059 ====== ====== ====== ====== ====== Revenue from Sale of Power (in millions of dollars In-Province $869 $872 $888 $931 $919 Out-of-Province 242 303 329 332 359 ------ ------ ------ ------ ------ Total Revenue from Sale of Power 1,111 1,175 1,217 1,263 1,278 Miscellaneous Revenue 29 29 31 46 41 ------ ------ ------ ------ ------ Total Revenue $1,140 $1,204 $1,248 $1,309 $1,319 ====== ====== ====== ====== ====== Number of Customers (at end of 342,095 344,086 350,633 353,724 356,440 period) (1) Average Revenue per kilowatt-hour In-Province 6.33(cent) 6.44(cent) 6.54(cent) 6.64(cent) 6.66(cent) Out-of-Province 5.07(cent) 4.30(cent) 5.26(cent) 6.81(cent) 6.82(cent) - ------------------ (1) Includes customers served indirectly through local distribution companies in the Cities of Saint John and Edmundston (41,777 at March 31, 2002).
41 The following summary financial information was extracted from the audited Consolidated Financial Statements of the Corporation. NEW BRUNSWICK POWER CORPORATION Summary Consolidated Balance Sheet (1) At March 31, -------------------------------- 2001 2002 --------- ---------- (millions of dollars) Assets Fixed Assets............................... $2,906 $2,840 Current Assets............................. 313 293 Deferred Charges........................... 79 103 --------- --------- Total Assets............................... $3,298 $3,236 ========= ========= Liabilities & Deficit Long-Term Debt............................. $2,624 $2,171 Current Liabilities........................ 584 941 Deferred Liabilities....................... 254 268 Deficit.................................... (164) (144) ---------- --------- Total Liabilities and Deficit.............. $3,298 $3,236 ========== ========= - ------------------- (1) Certain 2001 figures have been reclassified to conform with 2002 financial statement presentation. Effective April 1, 2001, the Corporation adopted the Canadian Institute of Chartered Accountants (CICA) amended standards for foreign exchange translation. The amended standard no longer allows foreign exchange gains or losses on long-term debt to be deferred and amortized over the life of the related debt issue. Income and retained earnings from prior years have been restated to reflect the amended standard. Adoption of the amended standard reduced opening retained earnings in 2001-2002 by $172 million and opening retained earnings in 2000-2001 by $106 million. 42
Summary Consolidated Statement of Income1 Year Ended March 31, ------------------------------------------------------------------- 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- Revenue $1,140 $1,204 $1,248 $1,309 1319 Expenditures Cost of Energy 404 374 395 501 489 Operations 439 472 510 530 544 Interest and exchange 350 383 277 356 266 ------ ------ ------ ------ ------ Total Expenditure 1,193 1,229 1,182 1,387 1,299 Income (loss) before transfers and write-off (53) (25) 66 (78) 20 Fuel channel account transfer 2 22 9 --- --- --- ------ ------ ------ ------ ------ Income (loss) before write-off (31) (16) 66 (78) 20 Write-off of deferred cost --- 450 --- --- --- ------ ------ ------ ------ ------ Net Income (Loss) for the year $ (31) $(466) $66 $(78) $20 ====== ====== ====== ====== ====== - ------------------------- (1) Certain figures have been reclassified to conform with 2002 financial statement presentation.. Effective April 1, 2001, the Corporation adopted the Canadian Institute of Chartered Accountants (CICA) amended standard for foreign exchange translation. The amended standard no longer allows foreign exchange gains or losses on long-term debt to be deferred and amortized over the life of the related debt issue. Income and retained earnings from prior years have been restated to reflect the amended standard. Adoption of the amended standard increased net income in 2001-2002 by $16 million; reduced net income in 2000-2001 by $68 million; increased net income in 1999-2000 by $49 million; decreased net income in 1998-1999 by $43 million; and decreased net income in 1997-1998 by $10 million. (2) The Corporation has discontinued the practice of having reserve accounts. The balance in all accounts was eliminated in September, 1998.
43
Summary Consolidated Statement of Cash Flow1 Year Ended March 31, -------------------------------------- 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- (millions of dollars) Net Income (Loss) $ (31) $ (466) $ 66 $ (78) $ 20 Non-Cash Items 185 705 171 292 214 Net Change in Non-Cash Working Capital Balances (20) 23 22 16 (35) ---- ---- ---- ---- ---- Cash Generated From Operating Activities 134 262 259 230 199 Cash Inflow (Outflow) Financing Activities (83) (186) (170) (91) (104) Cash Inflow (Outflow) Investing Activities (67) (73) (62) (116) (135) ---- ---- ---- ---- ---- Net Cash Inflow (Outflow) (16) 3 27 23 (40) Cash Position at Beginning of Year 20 4 7 34 57 ---- ---- ---- ---- ---- Cash Position at End of Year $ 4 $ 7 $ 34 $ 57 $ 17 ==== ==== ==== ==== ==== - ------------------- (1) Certain figures have been reclassified to conform with 2002 financial statement presentation. Effective April 1, 2001, the Corporation adopted the Canadian Institute of Chartered Accountants (CICA) amended standards for foreign exchange translation. The amended standard no longer allows foreign exchange gains or losses on long-term debt to be deferred and amortized over the life of the related debt issue. Income and retained earnings from prior years have been restated to reflect the amended standard. Adoption of the amended standard increased net income in 2001-2002 by $16 million; reduced net income in 2000-2001 by $68 million; increased net income in 1999-2000 by $49 million; decreased net income in 1998-1999 by $43 million; and decreased net income in 1997-1998 by $10 million.
44 TABLES AND SUPPLEMENTARY INFORMATION OF THE PROVINCE In the following tables, the revenue and expenditure for the four fiscal years ended March 31, 2002 have been extracted from the Public Accounts for such years (subject to certain adjustments for purposes of comparability). For the fiscal year ending March 31, 2003, the numbers have been extracted from the Budget and the forecast of revenue and expenditure published in the Budget Estimates. Revenue and expenditure are expressed on a net basis.
TABLE I - COMPARATIVE STATEMENT OF ORDINARY REVENUE Fiscal Year Ended March 31, Budget (millions of dollars) Estimate -------------------------------------------------- ------------- 1999 2000 2001 2002 2003 ---------- ----------- ----------- ------------ ------------- Own Source Taxes $2,008.2 $2,192.7 $2,325.5 $2,376.3 $2,423.4 Investment Income 1 (273.2) 173.0 99.5 177.9 248.0 Licenses and Permits 88.9 98.6 99.8 95.3 95.5 Sale of Goods and Services 81.4 82.2 81.0 83.8 81.4 Royalties 59.8 59.6 63.6 58.2 60.9 Return on Investment 19.6 23.4 21.7 22.1 22.8 Fines and Penalties 1.3 1.8 1.6 1.3 1.7 Other 13.7 18.4 20.0 15.4 12.6 ---------- ----------- ----------- ------------ ------------- Total - Own Source 1,999.7 2,649.7 2,712.7 2,830.3 2,946.3 ---------- ----------- ----------- ------------ ------------- Grants from Canada Unconditional Grants - Canada 1,866.7 1,589.2 1,590.4 1,818.0 1,698.3 Conditional Grants - Canada 188.6 179.1 178.1 182.3 185.7 ---------- ----------- ----------- ------------ ------------- Total - Grants from Canada 2,055.3 1,768.3 1,768.5 2,000.3 1,884.0 ---------- ----------- ----------- ------------ ------------- Total - Ordinary Revenue $4,055.0 $4,418.0 $4,481.2 $4,830.6 $4,830.3 ========== =========== =========== ============ ============= - ------------------ (1) Includes Lottery Revenues, New Brunswick Municipal Finance Corporation, New Brunswick Liquor Corporation, New Brunswick Power Corporation, Workplace Health, Safety and Compensation Commission.
TABLE II - COMPARATIVE STATEMENT OF ORDINARY EXPENDITURE Fiscal Year Ended March 31, Budget (millions of dollars) Estimate -------------------------------------------------- ------------- 1999 2000 2001 2002 2003 ---------- ----------- ----------- ------------ ------------- Economic Development $417.5 $152.3 $126.4 $144.6 $118.8 Education 836.4 823.7 821.9 886.5 943.7 Employment Development & Labour --- 202.7 200.7 198.4 205.2 Family and Community Services 373.6 651.9 654.2 679.7 699.1 Health 1,404.3 1,208.0 1,280.0 1,393.4 1,430.2 Municipal Affairs 126.7 --- --- --- --- Protection Services 107.0 125.8 123.5 126.2 128.7 Resource Sector --- 133.9 137.7 130.2 133.0 Transportation 148.1 146.2 145.3 150.7 148.6 Central Government 184.8 353.9 435.7 471.4 440.1 Service of the Public Debt 616.4 610.7 637.3 651.8 685.0 ------------ ------------ ------------ ------------ ---------- Total Ordinary Expenditure $4,214.8 $4,409.1 $4,562.7 $4,832.9 $4,932.4 ============ ============ ============ ============ ==========
45
TABLE III -- COMPARATIVE STATEMENT OF NET CAPITAL EXPENDITURE Fiscal Year Ended March 31, Budget (millions of dollars) Estimate ---------------------------------------------- ------------- 1999 2000 2001 2002 2003 ---------- ---------- ---------- ---------- ------------- Expenditure: Highways $175.6 $179.4 $80.8 $107.4 $151.6 Bridges 19.5 25.1 13.2 16.7 16.5 Economic and Regional Development Projects 5.6 5.0 2.9 0.7 --- Schools 20.3 38.8 33.6 34.5 34.0 Hospitals 11.3 17.0 8.2 12.1 11.6 Other Public Buildings 7.2 7.5 7.9 13.4 19.0 Land Purchase 62.6 --- --- --- --- Water Pollution Control Grants 0.8 2.1 2.5 0.5 0.5 Solid Waste Management 10.7 11.0 0.5 0.4 0.9 Purchase of Vehicles and Equipment 4.3 2.8 --- --- --- Other 7.3 7.7 3.5 17.2 23.7 ---------- ---------- ---------- ---------- ------------- Total Expenditure 325.2 296.4 153.1 202.9 257.8 ---------- ---------- ---------- ---------- ------------- Recoveries: Recoveries from Canada Highways 19.1 33.5 9.6 16.6 40.1 Economic and Regional Development Projects 8.2 7.0 0.5 0.8 7.0 Other 10.1 --- --- 0.7 0.2 ---------- ---------- ---------- ---------- ------------- 37.4 40.5 10.1 18.1 47.3 Other Recoveries 4.5 2.5 1.1 1.8 0.7 ---------- ---------- ---------- ---------- ------------- Total Recoveries 41.9 43.0 11.2 19.9 48.0 ---------- ---------- ---------- ---------- ------------- Net Capital Expenditure $283.3 $253.4 $141.9 $183.0 $209.8 ========== ========== ========== ========== =============
TABLE IV -- COMPARATIVE STATEMENT OF NET DEBT Fiscal Year Ended March 31, Budget (millions of dollars) Estimate ---------------------------------------------- ------------- 1999 2000 2001 2002 2003 ---------- ---------- ---------- ---------- ------------- Net Debt - Beginning of year $5,783.0 $5,982.7 $6,913.8 $6,798.0 $6,654.2 ---------- ---------- ---------- ---------- ------------- Ordinary Account (Surplus) Deficit 159.8 (8.9) 81.5 2.3 102.0 Net Capital Expenditure 283.3 253.4 141.9 183.0 209.8 Special Purpose (Surplus) Deficit (8.7) (7.3) (6.7) (3.6) (1.5) Special Operating Agency (Surplus) Deficit (5.3) 0.8 (6.0) 2.6 (11.6) Earnings from Sinking Funds (226.5) (203.6) (220.0) (230.9) (240.0) Elimination of Inter-Account Transactions --- --- --- (1.1) --- Adjustments on Consolidation (2.9) (7.1) (106.5) (96.1) --- ---------- ---------- ---------- ---------- ------------- Increase (Decrease) in Net Debt for the year 199.7 27.3 (115.8) (143.8) 58.7 Unusual Item --- 903.8 --- --- --- ---------- ---------- ---------- ---------- ------------- Net Debt - End of year $5,982.7 $6,913.8 $6,798.0 $6,654.2 $6,712.9 ========== ========= ========== ========== =============
46
TABLE V -- COMPARATIVE STATEMENT OF NET LOANS AND ADVANCES Fiscal Year Ended March 31, Budget (millions of dollars) Estimate ---------------------------------------------- ------------- 1999 2000 2001 2002 2003 ---------- ---------- ---------- ---------- ------------- Disbursements: Agricultural Development Board $4.4 $4.2 $3.1 $1.9 $5.8 Algonquin Properties Ltd. 1.2 1.0 --- --- --- Economic Development Act 22.2 28.9 39.2 10.8 45.0 Fisheries Development Act 4.5 5.1 4.5 5.1 8.0 Housing 6.3 6.4 6.7 6.3 7.1 Other 4.2 0.2 4.2 11.4 3.1 ---------- ---------- ---------- ---------- ------------- 42.8 45.8 57.7 35.5 69.0 ---------- ---------- ---------- ---------- ------------- Recoveries: Agricultural Development Board 0.9 1.3 1.9 1.6 3.5 Economic Development Act 23.6 13.0 18.8 8.7 13.0 Fisheries Development Act 3.3 4.4 4.4 3.6 4.4 Housing 2.6 3.0 3.3 3.9 3.4 Other 1.9 2.1 0.8 5.1 2.2 ---------- ---------- ---------- ---------- ------------- 32.3 23.8 29.2 22.9 26.5 ---------- ---------- ---------- ---------- ------------- Net Loans and Advances $10.5 $22.0 $28.5 $12.6 $42.5 ========== ========== ========== ========== =============
47
FUNDED DEBT OUTSTANDING AT MARCH 31, 2002 Sinking Fund Amount Interest Installment Outstanding Date of Maturity Rate % Rate % Series Currency Amount Amount (CAN $) Date Issued Reference - ---------------- ----- ----- ------ --------------- --------------- ------------ --------- Repayable in United States Dollars: 1 Oct 2002 7.125 1 & 1.5 EL US$ 257,000.0 $409,529.5 Oct 92, Dec 93 2,9 29 June 2004 7.625 1.5 EY 200,000.0 318,700.0 June 1994 2 5 July 2004 7.556 1.5 EX 47,500.0 75,691.3 July 1994 2,11 20 June 2005 6.5 1.5 FH 150,000.0 239,025.0 June 1995 2 15 Feb. 2013 7.625 1 & 1.5 EO 200,000.0 318,700.0 February 1993 2 15 Aug. 2013 6.75 1 & 1.5 ET 200,000.0 318,700.0 Sept. 1993 2 3 March 2018 9.5 1 & 1.5 DM 139,005.0 221,504.5 March 1988 4,6 15 May 2020 9.75 1 & 1.5 DU 200,000.0 318,700.0 May 1990 2 1 May 2022 8.75 1 & 1.5 EI 200,000.0 318,700.0 May 1992 2 ------------------- -------------- US$ 1,593,505.0 C$ 2,539,250.2 =================== -------------- Repayable in Japanese Yen: 7 July 2002-10 5 1.5 DI 9,744,000.0 C$ 117,083.9 July 1987 5 ------------------- ------------ 9,744,000.0 C$ 117,083.9 =================== -------------- Repayable in Swiss Francs: 3 Nov. 2006 5.625 1.5 FQ 100,000.0 C$ 94,640.0 March 1998 2,15 =================== -------------- Sfr 100,000.0 C$94,640.0 =================== -------------- Repayable in Canadian Dollars: 1 Apr. 2002-1 Mar. 2003 12.01 - 16.53 1 CP 73,185.0 1982 - 1983 1 1 Apr. 2002 9.125 1 & 1.5 EE 200,000.0 Dec. 1991 2 23 May 2002 8.1 1.5 FG 20,000.0 May 1995 2 26 Aug. 2002 8.375 1 & 1.5 EK 200,000.0 August 1992 2 9 Dec. 2002 8.44 1.5 EM 30,640.6 Dec. 1992 2,7 17 Mar. 2003 8 1 EQ 300,000.0 Mar, Apr. 1993 2,10 5 Apr. 2003-1 Mar. 2004 10.92 - 12.14 1 CP 71,205.0 1983 - 1984 1 28 July 2003 7.5 1 & 1.5 ES 200,000.0 July 1993 2 3 Dec. 2003 7.441 1.5 EU 59,750.5 Dec. 1993 2,8 2 Apr. 2004-10 Jan. 2005 12.08 - 14.06 1 CP 67,087.0 1984 - 1985 1 9 June 2004 5.4 1.5 FS 50,000.0 June 1998 2 26 Aug. 2004 Floating 1.5 EZ 71,200.0 August 1994 2,12 27 Sept. 2004 Floating 1.5 FB 41,101.5 Sept. 1994 2,13 1 Oct. 2004 Floating 1.5 FA 55,100.0 Sept. 1994 2,14 10 Apr. 2005-10 Dec. 2005 10.8 - 12.57 1 CP 46,125.0 1985 1 19 Apr. 2005 8.75 1 & 1.5 FE 200,000.0 April 1995 2 15 Dec. 2005 7.50 1 & 1.5 FK 200,000.0 Dec. 1995 2 9 May 2006-10 Mar. 2007 9.04 - 9.97 1 CP 75,518.0 1986 - 1987 1 19 June 2006 7.75 1.5 FL 200,000.0 June 1996 2 16 Sept. 2006 9.75 1.5 DE 100,000.0 Sept. 1986 3 16 Oct. 2006 7.10 1.5 FM 200,000.0 Oct. 1996 2 3 Nov. 2006 5.625 1.5 FQ 54,932.2 March 1998 2,15 26 Feb. 2007 6.75 1 & 1.5 FN 200,000.0 February 1997 2 10 Apr. 2007-10 Mar. 2008 9.12 - 11.07 1 CP 62,396.0 1987 - 1988 1 11 Apr. 2008-1 Dec. 2008 9.62 - 10.39 1 CP 59,314.0 1988 1 2 June 2008 5.70 1.5 FR 550,000.0 Mar, Oct 1998 2,16 3 Apr. 2009-1 Mar. 2010 9.15 - 10.31 1 CP 64,307.0 1989 - 1990 1 2 June 2009 5.25 1.5 FU 550,000.0 May, Sept 1999 2,18 48 22 June 2009 10.25 1.5 DR 88,019.0 June 1989 2,6 23 Nov. 2009 10 1 & 1.5 DT 120,359.0 Nov. 1989 2,6 2 Apr. 2010-1 Mar. 2011 10.36 - 11.04 1.5 CP 40,360.0 1990 - 1991 1 15 June 2010 6.375 1 & 1.5 FW 600,000.0 June, Dec 2000 2,20 10 Apr. 2011-10 July 2011 9.81 - 10.04 1.5 CP 58,458.0 1991 1 12 July 2011 5.8 1 & 1.5 FX 600,000.0 Feb,June 2001 2,21 31 Oct. 2011 10.125 1 & 1.5 ED 200,000.0 Oct. 1991 2 011 Dec 01, Feb 1 Dec. 2 5.85 1 & 1.5 FY 600,000.0 02 2,22 11 May 2012-10 July 2012 9.17 - 9.45 1.5 CP 41,673.0 1992 1 18 Jan. 2013 9.25 1 & 1.5 EN 200,000.0 January 1993 2 28 June 2013 8.5 1 & 1.5 ER 200,000.0 June 1993 2 13 Jan. 2014 7.75 1.5 EW 200,000.0 January 1994 2 12 May 2015 8.75 1 & 1.5 FF 200,000.0 May 1995 2 27 June 2017 6.75 1.5 FO 250,000.0 June 1997 2 27 Dec. 2017 6 1.5 FP 250,000.0 Nov. 1997 2 2 Apr. 2019 - 3 Mar. 2020 5.64-6.82 1.5 CP 46,892.0 1999-2000 1 1 Apr. 2020 - 2 Mar. 2021 6.25-6.76 1.5 CP 53,014.0 2000-2001 1 1 Apr. 2021 - 1 Mar. 2022 6.26-6.70 1.5 CP 74,784.4 2001-2002 1 27 Dec. 2028 5.65 1.5 FT 500,000.0 July 98,Feb 99 2,17 15 Dec. 2029 5.75 / 6.29 1 FV 50,000.0 Dec. 1999 19 ----------------- C$ 8,375,421.2 ----------------- C$ 11,126,395.3 ================= - --------------- Note: Up to 31 March 1980, the sinking fund installment rate on the Series CP debentures was 3%. Commencing 1 April 1980, the minimum rate was reduced to 1%.
49 References: (1) Issued to Canada Pension Plan Investment Fund, not negotiable, transferable or assignable. Twenty year bonds redeemable in whole, or in part, at 100% on not less than six months notice. (2) Non-callable. (3) Redeemable at the option of the Province on 16 September 2003 or on any date thereafter prior to maturity, as a whole or in part, on not less than 30 days notice at 100% of the principal amount plus accrued interest, if any, to the date fixed for redemption. (4) Redeemable in whole or in part at any time on or after 3 March 2003 at par plus accrued interest on not less than 30 days prior notice. (5) Repayable in twenty semi-annual instalments of 4.7% of the principal from 7 July 2000 to 7 January 2010 with the remaining balance due on 7 July 2010. Redeemable in whole or in part at the option of the Province on not less than 30 days notice on 7 July 2000 or any interest payment date thereafter at a premium of one half of one percent of the principal amount prepaid plus accrued interest provided that the amount prepaid is one billion yen or an integral multiple thereof or all of the loan then outstanding. (6) Pursuant to Section 24 of the Provincial Loans Act, the Minister of Finance authorized the cancellation of a portion of this issue held as an investment in the Sinking Fund effective 1 April 1991. The Sinking Fund instalment is the same as that made prior to the cancellation. (7) Canadian $30,640.6 represents the amount payable under an interest rate and currency swap agreement with a counterparty for the repayment at maturity of the Province's debt of series EM 5.5% 3,000,000.0 Yen due 9 December 2002. Interest is payable semi-annually in Canadian dollars at the rate of 8.44% per annum. (8) Canadian $59,750.5 represents the amount payable under an interest rate and currency swap agreement with a counterparty for the repayment at maturity of the Province's debt of series EU 5,000,000.0 Yen due 3 December 2003. Interest is payable at the rate of 7.441% semi-annually. (9) In December 1993, the Province issued an additional $32,000.0 of its series EL debentures. (10) In April 1993, the Province issued an additional $100,000.0 of its series EQ debentures. (11) US $47,500.0 represents the amount payable under an interest rate and currency swap agreement with a counterparty for the repayment at maturity of the Province's debt of Series EX 4.6% 5,000,000.0 Yen due 5 July 2004. Interest payments under the agreement are at a rate of 7.556% semi-annually in US dollars. (12) Canadian $71,200.0 represents the amount payable under an interest rate and currency swap agreement with a counterparty for the repayment at maturity of the Province's debt of Series EZ 4.4% 5,000,000.0 Yen due 26 August 2004. Interest is payable semi-annually in Canadian dollars at a floating rate. (13) Canadian $41,101.5 represents the amount payable under an interest rate and currency swap agreement with a counterparty for the repayment at maturity of the Province's debt of Series FB 4.7% 3,000,000.0 Yen due 27 September 2004. Interest is payable semi-annually in Canadian dollars at a floating rate. (14) Canadian $55,100.0 represents the amount payable under an interest rate and currency swap agreement with a counterparty for the repayment at maturity of the Province's debt of Series FA 4.76% 4,000,000.0 Yen due 1 October 2004. Interest is payable quarterly in Canadian dollars at a floating rate. (15) Swiss Franc 100,000.0 represents the amount payable under a swap transaction for the repayment at maturity of a portion of series FQ $150,000.0 due 3 November 2006. The remaining $54,932.2 of series FQ is repayable in Canadian dollars. Interest is payable semi-annually in Canadian dollars. (16) In October 1998, the Province issued an additional $250,000.0 of its Series FR debentures. (17) In February 1999, the Province issued an additional $250,000.0 of its Series FT debentures. (18) In September 1999, the Province issued an additional $250,000.0 of its Series FU debentures. (19) Puttable at par on 15 December 2007 at the option of the note holder with 10 calendar days notice. The interest rate is 5.75% to 15 December 2007. After this date, until maturity, the interest rate is 6.29%. (20) In December 2000, the Province issued an additional $300,000.0 of its Series FW debentures. (21) In June 2001, the Province issued an additional $300,000.0 of its Series FX debentures. (22) In February 2002, the Province issued an additional $300,000.0 of its Series FY debentures 50 FOREIGN EXCHANGE Canada maintains a floating exchange rate for the Canadian dollar to permit the rate to be determined by fundamental market forces without intervention except as required to maintain orderly conditions. Spot exchange rates for the U.S. dollar, Japanese yen and Swiss franc in Canada, expressed in Canadian dollars, are shown in the table below for 1997 through 2001. Average of Noon Spot Rates 1997 1998 1999 2000 2001 - -------------------------- ---- ---- ---- ---- ---- U.S. Dollar $1.3844 $1.4831 $1.4859 $1.4852 $1.5489 Japanese Yen (100 yen) 1.145 1.139 1.311 1.378 1.2755 Swiss Franc 0.9548 1.0258 0.9901 0.8796 0.9189 Source: Bank of Canada SOURCES OF INFORMATION Information included herein which is designated as being taken from a publication of the Province or Canada, or any agency or instrumentality of either, is included herein upon the authority of such publication as a public official document. The financial statements of the Province included herein under the heading "Tables and Supplementary Information of the Province" have been taken from the Public Accounts of the Province (subject to certain adjustments for purposes of comparability) and the forecast of revenue and expenditure published in the Budget Estimates. All financial information of the Province contained herein was obtained from the annual Budget and Main Estimates, the financial reviews pertaining thereto and the Public Accounts, or was prepared by representatives of the Department of Finance in their official capacities. The information set forth under "Province of New Brunswick", and other than as described in the preceding paragraph, was prepared by representatives of the Department of Finance in their official capacities. 51 EX-99.E 4 ex99-e.txt AUDITED FINANCIAL STATEMENTS EXHIBIT (e) AUDITED FINANCIAL STATEMENTS PROVINCE OF NEW BRUNSWICK FOR FISCAL YEAR ENDED MARCH 31, 2002 2001-2002 MAJOR VARIANCE ANALYSIS Explanations of major variances are described below, first for revenue, then for expenditure. In this analysis, comparisons are made between the actual results for 2001-02 and either the 2001-02 budget or actual results for 2000-01. BUDGETARY REVENUE PROVINCIAL SOURCES TAXES ON CONSUMPTION Taxes on consumption were down by $11.3 million from budget. This was mainly due to harmonized sales tax (HST) revenues being $31.4 million lower than budget as a result of lower federal estimates of New Brunswick's portion of the harmonized sales tax. The decrease in HST was partially offset by a $19.7 million increase in tobacco tax revenues, primarily a result of tax increases announced in April and November 2001. Taxes on consumption were up $24.1 million from 2000-01 mainly due to tobacco tax revenues increasing by $19.9 million, primarily attributable to rate increases in April and November 2001. TAXES ON PROPERTY Taxes on property were up $16.6 million from budget due to higher revenues from property assessments than anticipated at time of budget. Compared to 2000-01, taxes on property were up $13.9 million reflecting higher revenue from property assessments. Taxes on Income Taxes on income were up $28.0 million from budget primarily due to an increase in corporate income tax revenues of $21.9 million, attributable to higher than anticipated corporate taxable income. Personal income taxes were $6.9 million above budget due to a positive prior year adjustment in respect of the 2000 taxation year. OTHER TAXES Other taxes were up $12.7 million from budget mainly due to higher than anticipated large corporation capital tax revenues of $7.0 million, primarily attributable to a positive prior year adjustment in respect of the 2000 taxation year. Compared to 2000-01, other taxes were up $12.7 million mainly due to higher large corporation capital tax revenues of $8.4 million, primarily a result of a positive prior year adjustment in respect of the 2000 taxation year affecting 2001-02 revenues. INVESTMENT INCOME Investment income was down $26.9 million from budget. This was mainly a result of WHSCC incurring a net loss of $35.7 million, a reduction of $36.8 million from the budget estimate, primarily as a result of higher claim costs and weaker market returns than anticipated. NB Power Corporation was down $10.0 million from budget. These losses were partially offset by increased revenues from other sources of investment income. Compared to 2000-01, investment income was up $82.7 million. This was mainly due to NB Power showing net income of $20.0 million in 2001-02 as opposed to a restated net loss of $78.0 million in 2000-01, which was primarily attributable to a change in accounting policy for foreign exchange translation. OTHER PROVINCIAL REVENUE Other provincial revenues were $20.7 million higher than estimated at budget primarily due to an increase in revenues associated with the consolidation of government organizations. FEDERAL SOURCES CANADA HEALTH AND SOCIAL TRANSFER THE CANADA HEALTH AND SOCIAL TRANSFER (CHST) WAS $90.9 MILLION HIGHER THAN IN 2000-01 AS A RESULT OF INCREASED FUNDING FROM THE FEDERAL GOVERNMENT. FISCAL EQUALIZATION PAYMENTS Equalization revenues were $104.3 million above budget due to positive prior year adjustments of $119.0 million, including the removal of the ceiling in respect of the 1999-2000 entitlement year. Equalization revenues were $170.8 million higher than in 2000-01 in large part due to significant, positive prior year adjustments in 2001-02. Increases in provincial revenues subject to equalization resulted in higher entitlements as well. BUDGETARY EXPENDITURE Education Education expenses were $25.0 million below budget, primarily because of higher than anticipated amortization of experience gains in the Teachers pension plan, which were partially offset by the investment in the University Infrastructure Trust. Education expenditures were $65.2 million higher than in 2000-01 mainly due to lower pension interest earned on the Teachers plan, negotiated wage increases including the teachers' collective agreement, enhanced access to post-secondary education, and increased access to high speed Internet in schools. HEALTH Health expenditures were $43.7 million higher than budget and $120.2 million higher than in 2000-01 because of increased costs in programs such as hospital services, Medicare and prescription drugs. FAMILY AND COMMUNITY SERVICES Family and Community Services expenditures were $13.5 million lower than budget mainly because of lower than anticipated growth in the Long Term Care Program. Family and Community Services expenditures were $26.5 million higher than in 2000-01 primarily because of general increases in Family and Community Social Services and Nursing Home Services. PROTECTION SERVICES Protection Services expenditures were $1.4 million higher than budget primarily because of increased security and emergency costs. Protection Services expenditures were $3.9 million higher than in 2000-01 primarily because of increased law enforcement costs and budgeted increases in the operation of the justice system. ECONOMIC DEVELOPMENT Economic Development expenditures were $10.1 million lower than budget, mainly because of less than anticipated uptake in the development programs of the Regional Development Corporation. Economic Development expenditures were $27.0 million higher than in 2000-01, mainly due to the Province's $20.0 million investment in the Innovation Trust Fund and funding for new initiatives in the Regional Development Corporation. These increases were partially offset by less than anticipated uptake in Business New Brunswick's Strategic Assistance Program. Employment Development and Labor Employment Development and Labor expenses were $3.7 million higher than in 2000-01, mainly due to increased costs in the New Brunswick Community College network, partially offset by savings in the Employment Development program and services. RESOURCE SECTOR Resource Sector expenditures were $4.4 million higher than budget mainly due to increased forest fire protection costs. TRANSPORTATION Transportation expenditures were $24.0 million higher than budget primarily due to winter maintenance expenditures, which are dependent on the length and severity of the winter, and an accelerated capital program and vehicle purchase program. Transportation expenditures were $46.6 million higher than in 2000-01 primarily due to an increased capital budget, and an accelerated capital program and vehicle purchase program. CENTRAL GOVERNMENT Central Government expenditures were $16.6 million greater than budget and $46.5 million higher than in 2000-01 mainly due to increased costs in provision for losses. SERVICE OF THE PUBLIC DEBT Service of the Public Debt was $14.5 million higher than in 2000-01 due mainly to expensing a portion of the interest on the debt associated with the Fredericton-Moncton highway project. FISCAL STABILIZATION FUND For the year ending 31 March 2002, an amount of $100.0 million was transferred from the Consolidated Fund to the Fiscal Stabilization Fund, pursuant to the Province's Fiscal Stabilization Fund Act. AUDITOR'S REPORT To the Legislative Assembly Province of New Brunswick I have audited the statement of financial position of the Province of New Brunswick as at 31 March 2002 and the statements of revenue and expenditure, cash flow and net debt for the year then ended. These financial statements are the responsibility of government. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by government, as well as evaluating the overall financial statement presentation. In my opinion, these financial statements present fairly, in all material respects, the financial position of the Province as at 31 March 2002 and the results of its operations and its cash flows for the year then ended in accordance with the accounting policies set out in Note 1 to the financial statements. As required by section 10 of the Auditor General Act, I report that, in my opinion, these policies have been applied on a basis consistent with that of the preceding year. Daryl C. Wilson, FCA Auditor General 9 August 2002 STATEMENT OF FINANCIAL POSITION as at 31 March 2002 (millions) Schedule 2002 2001 ASSETS 1 Accounts and Interest Receivable $ 285.1 $ 263.2 2 Taxes Receivable 382.4 376.4 3 Inventories 26.8 27.4 4 Prepaid and Deferred Charges 134.9 86.6 Unrealized Foreign Exchange Losses 159.2 182.8 5 Loans and Advances 157.5 154.2 6 Investments (71.6) (117.8) Excess of Pension Assets Over Accrued Benefits (Note 14) --- 68.4 ------ ------ Total Assets $1,074.3 $1,041.2 ======== ======== LIABILITIES 7 Bank Advances and Short Term Borrowing $ 352.3 $ 484.8 8 Accounts Payable 436.6 317.3 9 Accrued Expenditures 676.0 709.9 10 Allowance for Losses 44.7 30.9 11 Deferred Revenue 286.1 325.2 12 Deposits Held in Trust 42.3 34.0 13 Obligations under Capital Leases (Note 9) 871.9 900.0 Unamortized Pension Adjustments and Valuation Allowance (Note 14) 372.6 511.0 ------- ------- 3,082.5 3,313.1 ------- ------- Funded Debt (Note 12) 11,126.4 10,717.3 Borrowing for NB Power Corporation (3,121.7) (3,061.1) -------- -------- Funded Debt for Provincial Purposes 8,004.7 7,656.2 Sinking Fund Investments (3,358.8) (3,130.2) -------- -------- 4,645.9 4,526.0 -------- -------- Total Liabilities 7,728.4 7,839.1 NET DEBT (6,654.1) (6,797.9) -------- -------- $1,074.3 $1,041.2 ======== ======== Contingent Liabilities - See Note 15 Commitments - See Note 16 The accompanying notes are an integral part of these Financial Statements. /s/ Mike Ferguson, C.A. Comptroller STATEMENT OF REVENUE AND EXPENDITURE for the fiscal year ended 31 March 2002 (millions) Schedule 2002 2002 2001 Budget Actual Actual -------- -------- --------- REVENUE Provincial Sources 14 Taxes on Consumption $ 925.0 $ 913.7 $ 889.6 Taxes on Property 272.0 288.6 274.7 15 Taxes on Income 1,064.1 1,092.1 1,091.9 16 Other Taxes 69.2 81.9 69.2 17 Licenses and Permits 100.0 101.6 106.6 18 Royalties 59.5 61.1 66.5 19 Investment Income 238.5 211.6 128.9 20 Other Provincial Revenue 179.2 199.9 192.8 Sinking Fund Earnings 230.0 230.9 220.0 ------- -------- -------- 3,137.5 3,181.4 3,040.2 Federal Sources Canada Health and Social Transfer 490.0 494.9 404.0 Fiscal Equalization Payments 1,217.0 1,321.3 1,150.5 Harmonization Transitional Payment --- --- 34.0 Other Unconditional Grants - Canada 1.9 1.9 1.9 21 Conditional Grants - Canada 224.1 217.2 204.4 ------- -------- -------- 1,933.0 2,035.3 1,794.8 ------- -------- -------- 5,070.5 5,216.7 4,835.0 ------- -------- -------- EXPENDITURE 22 Education 964.6 939.6 874.4 23 Health 1,366.8 1,410.5 1,290.3 24 Family and Community Services 696.4 682.9 656.4 25 Protection Services 136.0 137.4 133.5 26 Economic Development 171.4 161.3 134.3 27 Employment Development and Labour 228.7 227.4 223.7 28 Resource Sector 149.6 154.0 154.4 29 Transportation 261.5 285.5 238.9 30 Central Government 405.9 422.5 376.0 Service of the Public Debt (Note 13) 654.8 651.8 637.3 ------- -------- -------- 5,035.7 5,072.9 4,719.2 ------- -------- -------- SURPLUS RESULTING IN DECREASE IN NET DEBT FOR THE YEAR $ 34.8 $ 143.8 $ 115.8 ======= ======== ======== Under legislation, a portion of the surplus for the year has been set aside in a Fiscal Stabilization Fund for fiscal policy purposes. Surplus for the year $ 34.8 $ 143.8 $ 115.8 Allocation to Fiscal Stabilization Fund (Note 5) --- (100.0) (100.0) ------- -------- -------- Surplus for fiscal policy purposes $ 34.8 $ 43.8 $ 15.8 ======= ======= ======= The accompanying notes are an integral part of these Financial Statements. STATEMENT OF CASH FLOW for the fiscal year ended 31 March 2002 (millions) 2002 2001 OPERATING ACTIVITIES Decrease in Net Debt for the Year $ 143.8 $ 115.8 Non Cash Items Amortization of Premiums, Discounts and Issue Expenses 7.5 7.9 Foreign Exchange Expense 56.7 44.5 Increase in Allowance for Doubtful Accounts 43.2 65.3 Sinking Fund Earnings (230.9) (220.0) Actual Losses Due to Foreign Exchange (23.8) (20.6) Decrease in Pension Liability (Note 14) (70.0) (153.4) Decrease in Deferred Revenue (39.1) (15.6) Capital Asset Acquisitions Charged to Operations 198.8 154.7 Proceeds from Disposal of Capital Assets (2.4) (2.1) (Increase) Decrease in Working Capital (Note 19) 5.6 (75.8) ------- -------- Net Cash From (Used in) Operating Activities 89.4 (99.3) ------- -------- INVESTING ACTIVITIES Purchase of Capital Assets (198.8) (154.7) Proceeds from Disposal of Capital Assets 2.4 2.1 (Increase) Decrease in Investments, Loans and Advances (62.2) 62.0 ------- -------- Net Cash Used in Investing Activities (258.6) (90.6) ------- -------- FINANCING ACTIVITIES Proceeds from Issuance of Funded Debt 663.2 648.0 Received from Sinking Fund for Redemption of Debentures and Payment of Exchange 120.6 128.0 Decrease in Obligations under Capital Leases (28.1) (0.7) Sinking Fund Installments (118.4) (112.7) Funded Debt Matured (335.6) (502.0) ------- -------- Net Cash From Financing Activities 301.7 160.6 ------- -------- INCREASE (DECREASE) IN CASH POSITION DURING YEAR 132.5 (29.3) CASH POSITION - BEGINNING OF YEAR (484.8) (455.5) ------- -------- CASH POSITION - END OF YEAR $(352.3) $ (484.8) ======== ========= CASH REPRESENTED BY Bank Advances and Short Term Borrowing $(352.3) $ (484.8) ======== ========= The accompanying notes are an integral part of these Financial Statements. STATEMENT OF NET DEBT for the fiscal year ended 31 March 2002 (millions) 2002 2001 NET DEBT - BEGINNING OF YEAR As Previously Published $ (6,625.9) $ (6,807.7) Prior Years' Adjustments (Note 2) NB Power Accounting Change for Foreign Currency (172.0) (106.0) ---------- --------- As Restated (6,797.9) (6,913.7) SURPLUS RESULTING IN DECREASE IN NET DEBT FOR THE YEAR 143.8 115.8 ---------- --------- NET DEBT - END OF YEAR $ (6,654.1) $ (6,797.9) ========== ========== The accompanying notes are an integral part of these Financial Statements. NOTES TO THE FINANCIAL STATEMENTS 31 March 2002 Note 1 Summary of significant accounting policies a) Provincial Reporting Entity In these financial statements, the Province is defined as the Provincial Reporting Entity. The Provincial Reporting Entity is comprised of certain organizations that are accountable to the Legislature. These accountable organizations are the Consolidated Fund, the General Sinking Fund, the Fiscal Stabilization Fund and certain agencies, commissions and corporations. The agencies, commissions and corporations included in this definition are identified below. Transactions and balances of organizations are included in these financial statements through one of the following accounting methods: Consolidation method - This method combines the accounts of distinct organizations. It requires uniform accounting policies for the organizations. Inter-organizational balances and transactions are eliminated under this method. This method reports the organizations as if they were one organization. Modified equity method - This method is used for government enterprises. Government enterprises are defined in note 10 to these financial statements. The modified equity method reports a government enterprise's net assets as an investment in the Province's Statement of Financial Position. The net income of the government enterprise is reported as investment income in the Province's Statement of Results. Inter-organizational transactions and balances are not eliminated. All gains or losses arising from inter-organizational transactions between government enterprises and other government organizations are eliminated. The accounting policies of government enterprises are not adjusted to conform with those of other government organizations. Equity method - This method of accounting is used for Hospital Corporations. The accounting policies of the Hospital Corporations are adjusted to comply with the policies of the Province. The annual deficits or surpluses of the Hospital Corporations are recorded as an expenditure or revenue. The total net accumulated deficits or surpluses of the Hospital Corporations are recorded as a liability or asset. This method results in the same net position that would result from the consolidation method. Transaction method - This method records only transactions between the Province and the other organizations. Organizations that have been included in the Provincial Reporting Entity through consolidation are: Algonquin Properties Limited; Arts Development Trust Fund; Environmental Trust Fund; Fiscal Stabilization Fund; Forest Protection Limited; Group Insurance Trust Fund; N.B. Agriexport Inc.; New Brunswick Credit Union Deposit Insurance Corporation; New Brunswick Highway Corporation; New Brunswick Housing Corporation; New Brunswick Investment Management Corporation; Regional Development Corporation; Service New Brunswick; Sport Development Trust Fund. Government enterprises that have been included in these financial statements through modified equity accounting are: Algonquin Golf Limited; Lotteries Commission of New Brunswick; New Brunswick Liquor Corporation; New Brunswick Municipal Finance Corporation; New Brunswick Power Corporation; Workplace Health, Safety and Compensation Commission. New Brunswick Hospital Corporations have been included in these financial statements using the equity method of accounting. Certain organizations that are accountable to the Legislature have been included through the transaction method. The transaction method was used because the appropriate methods would not produce a materially different result. The determination of which entities to exclude because of materiality was made by Board of Management. The organizations included through the transaction method are: Advisory Council on the Status of Women; Board of Commissioners of Public Utilities of New Brunswick; Fundy Linen Services Inc.; Kings Landing Corporation; New Brunswick Crop Insurance Commission; New Brunswick Distance Education Network; New Brunswick Museum; New Brunswick Public Libraries Foundation; New Brunswick Research and Productivity Council; Premier's Council on the Status of Disabled Persons; Provincial Holdings Ltd.; Strait Crossing Finance Inc.; Youth Council of New Brunswick. b) SIGNIFICANT ACCOUNTING POLICIES Accrual Accounting Expenditures are recorded for all goods and services received during the fiscal year. Revenue from Canada under the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act, 1977, and the Canada-New Brunswick Tax Collection Agreement is accrued based on estimates provided by Canada. These estimates are subject to adjustment in future years. Such adjustments are included in revenue when Canada informs the Province of the revisions. The most recent revision included in these financial statements is dated 27 February 2002. All other revenues and recoveries are recorded on an accrual basis. Debt Charges Interest and other debt service charges are reported in the Statement of Revenue and Expenditure as Service of the Public Debt except as described below: Because government enterprises are included in the Provincial Reporting Entity through modified equity accounting, the cost of servicing their debt is not included in the Service of the Public Debt expenditure. The cost of servicing the debt of government enterprises is an expenditure included in the calculation of their net profit or loss for the year. Interest costs imputed on the Province's Accrued Pension Liability are recorded as part of pension expense, which is included in various expenditure functions. Interest earned on the assets of the General Sinking Fund and on other provincial assets is reported as revenue. Note 13 to these financial statements reports the components of the Service of the Public Debt Expenditure function and total debt charges. Government Transfers GOVERNMENT TRANSFERS ARE TRANSFERS OF MONEY, SUCH AS GRANTS, FROM A GOVERNMENT TO AN INDIVIDUAL, AN ORGANIZATION OR ANOTHER GOVERNMENT FOR WHICH THE GOVERNMENT MAKING THE TRANSFER DOES NOT RECEIVE ANY GOODS OR SERVICES DIRECTLY IN RETURN. Government transfers are recognized in the Province's financial statements as expenditures or revenues in the period that the events underlying the transfer occurred. Liabilities have been established for any transfers due at 31 March 2002 for which the intended recipients have met the eligibility criteria. Receivables have been established for transfers to which the Province is entitled under governing legislation, regulation or agreement. During the year ended 31 March 2001, a supplement to the Canada Health and Social Transfer of $60.4 million was received from Canada. This is being recognized as revenue on a straight-line basis over four years. A similar supplement of $85.8 million was received during the year ended 31 March 2000 and is being recognized as revenue on a straight-line basis over three years. Physical Assets The cost of acquiring physical assets is expensed in the year of acquisition. The Statement of Financial Position does not report an amount for these assets. See Note 20 regarding Tangible Capital Assets.. Short Term Investments Short term investments are recorded at cost. Allowances Allowances have been established for accounts receivable, loan guarantees and other possible losses. These allowances are disclosed in the schedules to the financial statements. The increase in these allowances charged to operations for the fiscal year ended 31 March 2002 was $43.2 million ($65.3 million 2001). Concessionary Loans There are two situations where the Province charges loan disbursements entirely as expenditures. These are: Loan agreements which commit the Province to provide future grants to the debtor to be used to repay the loan. Loan agreements which include forgiveness provisions if the forgiveness is considered likely. In both these situations, the loan is charged to expenditure when it is disbursed. Loans that are significantly concessionary because they earn a low rate of return are originally recorded as assets at the net present value of the expected future cash flows. The net present value is calculated using the Province's borrowing rate at the time the loan was issued. The difference between the nominal value of the loan and its net present value is recorded as an expenditure. Inventories Inventories are recorded at the lower of cost or net realizable value. Inventories include supplies for use, and goods and properties held for resale. Properties held for resale include land and fixtures acquired or constructed for the purpose of sale. Properties held for resale also include properties acquired through foreclosure. Properties acquired through foreclosure which have not been disposed of within two fiscal year ends of repossession are removed from inventory and are recorded as expenditure. Deferred Revenue Amounts received or recorded as receivable but not earned by the end of the fiscal year are recorded as deferred revenue. Deposits Held in Trust Any funds remitted to the Province and held in trust for specified persons are included in both the financial assets and liabilities of the Province. Legally established trust funds which the Province administers but does not control are not included as Provincial assets or liabilities. Note 18 to these financial statements discloses the equity balances of the trust funds administered by the Province. Borrowing on Behalf of New Brunswick Power Corporation The Province, as represented by the Consolidated Fund, has issued long term debt securities on behalf of New Brunswick Power Corporation in exchange for debentures with like terms and conditions. The New Brunswick Power Corporation debentures received by the Province are reported in the Statement of Financial Position as a reduction of Funded Debt. This financing arrangement was used to obtain more favourable debt servicing costs. The transactions involving these securities, including the debt servicing costs, are not part of the budget plan of the Province's Consolidated Fund. Foreign Currency Translation The Province's assets, liabilities and contingent liabilities denominated in foreign currencies are translated to Canadian dollars at the year end rates of exchange, except where such items have been hedged or are subject to interest rate and currency swap agreements. In such cases, the rates established by the hedge or the agreements are used in the translation. Revenue and expenditure items are translated at the rates of exchange in effect at the respective transaction dates. Exchange gains and losses are included in the Statement of Revenue and Expenditure except for the unrealized exchange gains and losses arising on the translation of long term items, which are deferred and amortized on a straight line basis over the remaining life of the related assets or liabilities. Leases Long term leases, under which the Province, as lessee, assumes substantially all the benefits and risks of ownership of leased property, are classified as capital leases although certain minimum dollar thresholds are in place for practical reasons. The present value of a capital lease is accounted for as an expenditure and an obligation at the inception of the lease. All leases under which the Province does not assume substantially all the benefits and risks of ownership related to the leased property are classified as operating leases. Each rental payment required by an operating lease is recorded as an expenditure when it is due. Measurement Uncertainty Measurement uncertainty is uncertainty in the determination of the amount at which an item is recognized in financial statements. This uncertainty exists when there is a variance between the recognized amount and another reasonably possible amount. Many items in these financial statements have been measured using estimates. Those estimates have been based on assumptions that reflect economic conditions. Some examples of where measurement uncertainty exists are the establishment of allowances for doubtful accounts and the determination of pension expense. NOTE 2 CHANGE IN ACCOUNTING POLICY During the year ended 31 March 2002, NB Power Corporation changed its method of accounting for foreign exchange gains and losses. Previously the Corporation deferred any unrealized gains or losses on the translation of foreign currency denominated monetary assets and liabilities, and amortized those gains or losses to income over the remaining term of the related debt issue. The new accounting policy requires foreign exchange gains or losses to be recognized immediately. This change has resulted in an increase in the Province's investment income from NB Power Corporation of $16.0 million for the year ended 31 March 2002 (decrease of $66.0 million for the year ended 31 March 2001), and an increase in the Province's opening Net Debt as at 1 April 2001 of $172.0 million (increase of $106.0 million as at 1 April 2000). NOTE 3 BUDGET The budget amounts included in these financial statements are the amounts published in the Main Estimates, adjusted for transfers from the Supplementary Funding Provision Program and elimination of inter-account transactions. Budget figures for the year ending 31 March 2002 have also been adjusted to include estimated revenue and expenditures, as approved by Board of Management, for those entities which are included in the reporting entity by way of consolidation method. The Supplementary Funding Provision Program is an appropriation which provides funding to other programs for costs associated with contract settlements and other requirements not budgeted in a specific program. NOTE 4 BALANCING OF EXPENDITURE AND REVENUE The Province's Balanced Budget Act requires that total expenditures not exceed total revenues for the period commencing 1 April 2000 and ending 31 March 2004. That Act stipulates that any change made within the last fifteen months of the period from 1 April 2000 to 31 March 2004, or after completion of that period, in relation to the official estimates by the Government of Canada for provincial entitlements under the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act or the Canada-New Brunswick Tax Collection Agreement, shall not be taken into account. The difference for the period ending 31 March 2002 between revenue and expenditure is as follows: (millions) ----------------------- 2001 2002 Actual Actual Revenue $ 4,835.0 $ 5,216.7 Expenditure 4,719.2 5,072.9 --------- --------- 115.8 143.8 Cumulative Difference - Beginning of Year --- 115.8 --------- --------- Cumulative Difference - End of Year $ 115.8 $ 259.6 ========= ========= NOTE 5 FISCAL STABILIZATION FUND The Province's Fiscal Stabilization Fund Act establishes a fund separate from the Consolidated Fund, for the purpose of assisting in stabilizing the fiscal position of the Province of New Brunswick from year to year and to improve long term fiscal planning. For the year ending 31 March 2002, an amount of $100.0 million ($100.0 million 2001) was transferred from the Consolidated Fund to the Fiscal Stabilization Fund. Any such transfers into the Fiscal Stabilization Fund are authorized by an appropriation in accordance with the Financial Administration Act. Transfers out of the Fund are made with the approval of the Lieutenant-Governor-in-Council. No transfers out of the Stabilization Fund were made during the year. The Fund has been included in these financial statements on a consolidated basis. NOTE 6 LOANS AND ADVANCES In addition to establishing budgets for various revenue and expenditure classifications, the Province budgets disbursements and recoveries for loans and advances. The budgeted amounts and actual results for the year ended 31 March 2002, and the actual results for the year ended 31 March 2001 are as follows: (millions) 2002 2002 2001 Budget Actual Actual Disbursements Agricultural Development Act $ 5.8 $ 1.9 $ 3.1 Economic Development Act 45.0 10.8 39.2 Fisheries Development Act 8.0 5.1 4.5 Housing 7.1 6.3 6.8 Nursing Home --- 1.7 2.8 Veterans' Affairs 11.3 9.7 1.3 Other 1.6 --- --- ------- ------- ------ Total Disbursements 78.8 35.5 57.7 ------- ------- ------- Recoveries Agricultural Development Act 2.0 1.6 1.9 Economic Development Act 9.3 8.7 18.8 Finance 0.2 0.2 0.4 Fisheries Development Act 4.2 3.6 4.4 Greater Moncton Area Transitional Policing --- 0.3 0.3 Housing 3.2 3.9 3.3 Nursing Home --- 4.5 --- Other 0.7 0.1 0.1 ------- ------ ------- Total Recoveries 19.6 22.9 29.2 ------- ------- ------- Net Loans and Advances $ 59.2 $ 12.6 $ 28.5 ======= ====== ======= NOTE 7 SPECIAL PURPOSE ACCOUNTS Special Purpose Account revenue earned but not spent accumulates as a surplus in that account and may be spent in future years for the purposes specified. At 31 March 2002, the accumulated surplus in all Special Purpose Accounts totaled $60.0 million ($56.4 million 2001). This total is recorded as a reduction in net debt. The following table summarizes the change in the accumulated Special Purpose Account surplus.
(millions) 2001 2002 ------------------------------------------------ Accumulated Accumulated Surplus Revenue Expenditure Surplus Education Canada Student Loans $ 0.5 $ 9.4 $ 9.4 $ 0.5 Fred Magee Account 0.2 0.1 --- 0.3 Library Account 0.2 0.3 0.1 0.4 Scholarship and Trusts --- 0.4 0.4 --- Self Sustaining Accounts 2.5 6.9 4.9 4.5 Environment and Local Government Environmental Trust Fund 1.4 5.0 4.7 1.7 Family and Community Services CMHC Funding 30.6 6.5 1.4 35.7 Finance Group Insurance Trust Fund 2.8 --- 1.4 1.4 Strait Crossing Finance Inc. --- 0.1 0.1 --- General Government Arts Development Trust Fund 1.0 0.7 1.2 0.5 Sport Development Trust Fund 0.1 0.5 0.5 0.1 Health and Wellness Hospital Liability Protection Account 1.8 2.2 4.0 --- Medical Research Assistance Account 3.2 0.1 0.1 3.2 WHSCC Compensation --- 0.2 0.2 --- Justice Family Support 0.1 0.2 0.2 0.1 Natural Resources and Energy Wildlife Conservation 1.5 1.1 1.4 1.2 Public Safety Municipal Police Assistance Account 0.1 0.6 0.6 0.1 National Safety Code Agreement 0.2 0.2 0.3 0.1 Suspended Driver - Alcohol Re-education Program 0.1 0.2 0.2 0.1 Victim Services Account 0.7 1.3 1.5 0.5 Supply and Services Land Management Account 6.3 1.7 1.5 6.5 Public/Private Partnership Projects 0.2 --- --- 0.2 Renovation of Old Government House 0.3 --- --- 0.3 Training and Employment Development Johann Wordel Account 0.1 --- --- 0.1 New Brunswick Community College Scholarship Account 0.2 --- --- 0.2 Recoverable Projects 2.3 0.5 0.5 2.3 ------ ------- ------- ------- $ 56.4 $ 38.2 $ 34.6 $ 60.0 ====== ======= ======= =======
NOTE 8 SPECIAL OPERATING AGENCIES Revenue may be generated by the Special Operating Agencies or from transfers from other budgetary accounts. Expenditures are incurred by the agencies in delivering the programs they offer and may be of a capital or operating nature. Special Operating Agency account revenue earned but not spent in any year, accumulates as a surplus in that account and may with permission from Board of Management be spent in future years. At 31 March 2002, the accumulated surplus in all Special Operating Agency accounts totaled $9.8 million ($12.5 million 2001). This total is recorded as a reduction in net debt. The following table summarizes the change in the accumulated Special Operating Agency surplus during the 2002 fiscal year.
(millions) 2001 2002 -------------------------------------------- Accumulated Accumulated Surplus Revenue Expenditure Surplus Business New Brunswick Mactaquac Golf Course $ 0.6 $ 0.9 $ 0.7 $ 0.8 Public Safety New Brunswick Safety Code Services 0.8 3.5 4.1 0.2 Regional Development Corporation Regional Development Corporation 3.9 14.9 9.0 9.8 Training and Employment Development New Brunswick Community College 5.3 101.7 101.2 5.8 Transportation Vehicle Management 1.9 66.8 75.5 (6.8) ------- ------- ------- ------- $ 12.5 $ 187.8 $ 190.5 $ 9.8 ======= ======= ======= =======
NOTE 9 OBLIGATIONS UNDER CAPITAL LEASES The total future principal and interest payments for capital leases amount to $1,902.8 million ($1,990.0 million 2001). That amount includes $871.9 million ($900.0 million 2001) in principal and $1,030.9 million ($1,090.0 million 2001) in interest. Minimum annual principal and interest payments in each of the next five years are as follows: Fiscal Year (millions) ----------- 2002-2003 $ 14.1 2003-2004 44.5 2004-2005 75.5 2005-2006 75.6 2006-2007 76.4 NOTE 10 GOVERNMENT ENTERPRISES A Government Enterprise is an organization accountable to the Legislative Assembly that has the power to contract in its own name, has the financial and operating authority to carry on a business, sells goods and services to customers outside the Provincial Reporting Entity as its principal activity, and that can, in the normal course of its operations, maintain its operations and meet its liabilities from revenues received from sources outside the Provincial Reporting Entity. The following is a list of Government Enterprises, and their fiscal year ends, which are included in the Provincial Reporting Entity as described in note 1 a) to these financial statements. Algonquin Golf Limited 31-12-01 Lotteries Commission of New Brunswick (Lotteries) 31-03-02 New Brunswick Liquor Corporation (Liquor) 31-03-02 New Brunswick Municipal Finance Corporation (Municipal Finance) 31-12-01 New Brunswick Power Corporation (Power) 31-03-02 Workplace Health, Safety and Compensation Commission (WHSCC) 31-12-01 The following table presents condensed financial information of these Government Enterprises.
(millions) Algonquin Municipal Golf Limited Lotteries Liquor Finance Power WHSCC Total ------ ------- ----- ----- ----- Assets Cash and Equivalents $ 0.2 $ --- $ 0.2 $ 0.2 $ 17.0 $ 569.3 $ 586.9 Receivables --- 0.5 2.0 4.5 169.0 94.8 270.8 Prepaids --- --- 0.4 --- 5.0 --- 5.4 Inventories --- --- 17.1 --- 102.0 --- 119.1 Deferred Charges --- --- --- --- 103.0 --- 103.0 Fixed Assets 6.8 --- 10.0 --- 2,840.0 9.2 2,866.0 Other Assets ---- --- --- 367.5 --- 0.4 367.9 -------- -------- -------- -------- --------------------- ---------- Total Assets $ 7.0 $ 0.5 $ 29.7 $ 372.2 $3,236.0 $ 673.7 $ 4,319.1 ======= ======= ======= ======= ======== ======= ========= -------------------------- ------------- ------------ ------------ -------------- -------------- ------------ -------------- Liabilities Short Term Indebtedness $ --- --- $ 0.5 $ --- $ --- $ --- $ 0.5 Payables 0.9 --- 10.8 4.5 222.0 10.1 248.3 Reserves 2.0 --- --- --- 268.0 --- 270.0 Long Term Debt 5.0 --- 2.7 366.9 95.7 670.2 1,140.5 Debt Funded by the Province --- --- --- --- 2,794.3 --- 2,794.3 -------- ------- -------- --------- -------- -------- ---------- Total Liabilities 7.9 --- 14.0 371.4 3,380.0 680.3 4,453.6 -------- ------- ------- ------- -------- ------- ---------- -------------------------- ------------- ------------ ------------ -------------- -------------- ------------ -------------- Equity Retained Earnings (0.9) 0.5 15.7 0.8 (144.0) (6.6) (134.5) --------- -------- ------- ---------- ----------- --------- --------- Total Equity (0.9) 0,.5 15.7 0.8 (144.0) (6.6) (134.5) --------- -------- ------- ---------- ----------- --------- ------------ Total Liabilities and Equity $ 7.0 $ 0.5 $ 29.7 $ 372.2 $3,236.0 $ 673.7 $ 4,319.1 ======= ======= ======== ======= ======== ======= ========= -------------------------- ------------- ------------ ------------ -------------- -------------- ------------ -------------- Net Income Revenue $ 1.4 $ 89.6 $ 292.5 $ 23.6 $1,319.0 $ 158.8 $ 1,884.9 Expenses (1.7) (0.5) (185.7) (0.1) (1,033.0) (194.5) (1,415.5) Interest Expense (0.3) --- --- (23.4) (266.0) --- (289.7) ------- -------- --------- -------- ---------- --------- ------------ Net Income $ (0.6) $ 89.1 $ 106.8 $ 0.1 $ 20.0 $ (35.7) $ 179.7 ======== ======= ======= ======== ========== ========= ========== -------------------------- ------------- ------------ ------------ -------------- -------------- ------------ --------------
The financial information of Government Enterprises is prepared according to generally accepted accounting principles, using accounting policies that are appropriate for the industry segment in which they operate. These accounting policies may not be consistent with accounting policies used by other member organizations of the Provincial Reporting Entity. Because minor adjustments are required for timing differences, the net income amounts reported in the financial statements of government enterprises may vary slightly from the investment income reported in the Province's Statement of Revenue and Expenditure. Algonquin Golf Limited Algonquin Golf Limited was incorporated on 29 May 1998 under the New Brunswick Business Corporation Act. Its purpose is to re-develop and operate the golf course formerly owned by Algonquin Properties Limited. The first year of operations was 2000, the course opened on 1 July 2000. Lotteries Commission of New Brunswick The Lotteries Commission of New Brunswick is a shareholder in Atlantic Lottery Corporation Inc. and in the Interprovincial Lottery Corporation. Atlantic Lottery Corporation Inc. is jointly owned by the four Atlantic Provinces and is responsible to develop, organize, undertake, conduct and manage lotteries in Atlantic Canada. Atlantic Lottery Corporation Inc. also markets and handles the products of the Interprovincial Lottery Corporation. The Interprovincial Lottery Corporation is a corporation jointly owned by the ten Canadian provinces. New Brunswick Liquor Corporation The New Brunswick Liquor Corporation was established under the New Brunswick Liquor Corporation Act. Its business activity is the purchase, distribution and sale of alcoholic beverages throughout the Province of New Brunswick. New Brunswick Municipal Finance Corporation The Municipal Finance Corporation was established under the New Brunswick Municipal Finance Corporation Act. Its purpose is to provide financing for municipalities and municipal enterprises through a central borrowing authority. New Brunswick Power Corporation The New Brunswick Power Corporation was established in 1920 under the Electric Power Act and is an agent of the Crown in right of the Province. The Corporation provides for the continuous supply of energy adequate for the needs and future development of the Province and promotes economy and efficiency in the distribution, supply, sale and use of power. Workplace Health, Safety and Compensation Commission The Workplace Health, Safety and Compensation Commission was established under the Workplace Health, Safety and Compensation Commission Act on 1 January 1995. It is responsible for administration of both the Occupational Health and Safety Act and the Worker's Compensation Act. The Workplace Health, Safety and Compensation Commission is dedicated to the promotion of a safe and healthy work environment and the provision of services to workplaces, employers and the injured workers of New Brunswick. The Commission administers the payment of benefits to injured workers, levies and collects assessment revenues and invests funds. The net assets of the Commission and all assessments collected from employers can only be used for the purposes of the Commission. NOTE 11 BORROWING AUTHORITY a) Balance of Borrowing Authority under the Provincial Loans Act The balance of borrowing authority granted under the Provincial Loans Act is as follows: (millions) Authority Granted Borrowing Balance During the During the Year Balance 2001 Year 2002 ---- ---- ---- Loan Act 1999 $ 422.4 $ --- $ 363.0 $ 59.4 Loan Act 2000 495.0 --- --- 495.0 Loan Act 2001 --- 445.0 --- 445.0 -------- --------- ------- -------- $ 917.4 $ 445.0 $ 363.0 $ 999.4 ======== ========= ======= ======== Under the authority of section 2 of the Provincial Loans Act, the maximum temporary indebtedness of the Province is $1,400.0 million. At 31 March 2002, bank advances and short term borrowing amounted to $352.3 million. Under the authority of subsection 3(1) of the Provincial Loans Act, the Province may borrow sums required for the repayment, refinancing or renewal of securities issued or for the payment of any loan or liability, repayment of which is guaranteed by the Province. This authority is in addition to the authorities listed above. b) Borrowing by the Municipal Finance Corporation The New Brunswick Municipal Finance Corporation has authority under the New Brunswick Municipal Finance Corporation Act to provide financing for municipalities and municipal enterprises. As at 31 December 2001, long term debt owed by the corporation was $366.9 million. NOTE 12 FUNDED DEBT OUTSTANDING The following is a maturity schedule for the total amount of the Province's Funded Debt.
(millions) ----------------------------------------------------------------------- Fiscal Interest Borrowing for Funded Debt for Year of Rate (%) Total Funded NB Power Provincial Maturity Range Currency Amount Debt Corporation Purposes ------------- ---------- --------------- ------------- -------------- ---------------- 2002-2003 7.1 US $257.0 $ 409.5 $ (191.2) 5.0 Yen 1,128.0 13.6 --- 8.0-16.5 CAN $823.8 823.8 (500.0) ------- -------- 1,246.9 (691.2) $ 555.7 --------- -------- 2003-2004 5.0 Yen 1,128.0 13.6 --- 7.4-12.1 CAN $330.9 330.9 (100.0) -------- ---------- 344.5 (100.0) 244.5 --------- ---------- 2004-2005 7.5-7.6 US $247.5 394.4 --- 5.0 Yen 1,128.0 13.6 --- 5.4-14.1 CAN $284.5 284.5 --- -------- ------- 692.5 --- 692.5 -------- --------- 2005-2006 6.5 US $150.0 239.0 --- 5.0 Yen 1,128.0 13.6 --- 7.5-12.6 CAN $446.1 446.1 (200.0) -------- ---------- 698.7 (200.0) 498.7 -------- ---------- 2006-2007 5.0 Yen 1,128.0 13.6 --- 5.6 Sfr 100.0 94.6 --- 5.6-10.0 CAN $830.5 830.5 (70.0) --------- ---------- 938.7 (70.0) 868.7 --------- --------- ----------- 2007-2008 6.75-9.8 US $939.0 1,496.4 (860.5) & After 5.0 Yen 4,104.0 49.1 --- 5.2-11.1 CAN $5,659.6 5,659.6 (1,200.0) --------- ----------- 7,205.1 (2,060.5) 5,144.6 --------- --------- ----------- Funded Debt before Sinking Fund Investments 11,126.4 (3,121.7) 8,004.7 Less: Sinking Fund Investments 3,686.2 (327.4) 3,358.8 ----------- ----------- ----------- Funded Debt Outstanding $ 7,440.2 $ (2,794.3) $ 4,645.9 ========= ========== ==========
Pursuant to section 12 of the Provincial Loans Act, the Minister of Finance maintains a General Sinking Fund for the repayment of funded debt either at maturity or upon redemption in advance of maturity. At 31 March 2002, the equity of the General Sinking Fund accumulated for the repayment of Provincial Debt was $3,358.8 million ($3,130.2 million 2001). Some of the assets of this Fund are bonds and debentures issued or guaranteed by the Province of New Brunswick. The provincial net book value of these investments at 31 March 2002 was $1,484.8 million ($1,402.5 million 2001). Because government enterprises are included in the reporting entity through modified equity accounting, long term debt issued directly by those enterprises is not included in the amount of Funded Debt Outstanding. Note 10 to these financial statements discloses the long term debt obligations of government enterprises. The following amounts, which are payable swap agreements, have been included in the preceding funded debt maturity schedule. They have been reflected in that schedule in the currency payable per each financial swap agreement. (millions) 2002 ----------------------------------------------------- Fiscal Amount Payable Amount Payable Canadian Year of In Original Per Financial Dollar Maturity Currency Swap Agreement Equivalent 2002-2003 Yen 3,000.0 CAN $ 30.6 $ 30.6 2003-2004 Yen 5,000.0 CAN $ 59.8 59.8 2004-2005 Yen 5,000.0 US $ 47.5 75.7 2004-2005 Yen 5,000.0 CAN $ 71.2 71.2 2004-2005 Yen 4,000.0 CAN $ 55.1 55.1 2004-2005 Yen 3,000.0 CAN $ 41.1 41.1 2006-2007 CAN $ 95.1 Sfr 100.0 94.6 ------- $428.1 All of the swap agreements are interest rate and currency swap agreements except the Sfr 100.0 issue due 2006-2007 which is a currency swap agreement only. The following estimated payments are required in each of the next five years to meet the sinking fund provisions of existing debt. Fiscal Year (millions) 2002-2003 $ 113.0 2003-2004 108.7 2004-2005 105.3 2005-2006 95.7 2006-2007 86.3 NOTE 13 DEBT CHARGES The total cost of interest, exchange, amortization and related expenses is $424.4 million ($363.7 million 2001), which consists of: (millions) 2002 2001 ---- ---- Interest $ 817.2 $ 851.1 Interest on Fredericton - Moncton Highway Capital Lease 22.5 --- Interest on Other Capital Leases 2.4 2.5 Foreign Exchange Expense 56.6 44.5 Other Expenses 1.8 1.2 -------- ------- 900.5 899.3 Interest Recovery for Debt Incurred for the New Brunswick Power Corporation (248.7) (262.0) -------- ------- Service of the Public Debt 651.8 637.3 Sinking Fund Earnings (230.9) (220.0) -------- ------- Debt Charges before Pension Interest 420.9 417.3 Pension Interest Charged (Earned) 3.5 (53.6) -------- ------- $ 424.4 $ 363.7 ======== ======= NOTE 14 PENSION PLANS a) Description Employees of the Province and certain other entities, as well as members of the Legislative Assembly, are entitled to receive pension benefits. The Pension plans under which these benefits are received are as follows: Date of Latest Plan Name Actuarial Valuation Public Service Superannuation Plan (PSSA) 01 April 2001 Teachers' Pension Plan (TPA) 01 April 2001 Provincial Court Act and Provincial Court Judges' Pension Act (Judges') 01 April 2001 Members' Superannuation Plan and Members' Pension Plan (Members') 01 April 1996 Pension Plan for Canadian Union of Public Employees of New Brunswick Hospitals (H-CUPE) --- Pension Plan for Management Employees of New Brunswick School Districts (Sch-Mgt) 01 January 1993 Pension Plan for General Labour, Trades and Services Employees of New Brunswick School Districts (GLTS) 01 January 2000 Pension Plan for Full-Time CUPE 2745 Employees of New Brunswick School Districts (CUPE 2745) 01 January 2000 Ombudsman Plan (Ombud) --- Pension Plan for Certain Bargaining Employees of New Brunswick Hospitals (H-Certain) --- Pension Plan for Part-time and Seasonal Employees (Part-time) --- Early Retirement / Workforce Adjustment Program (Early Ret) 01 April 1999 Pension funds distinct from the Consolidated Fund exist for each of these pension plans, except the Members' Superannuation Plan, Members' Pension Plan and the Ombudsman Plan. The following is a summary of the contribution levels and basic member benefits for each pension plan. Complete plan descriptions are contained in the specific plan documentation.
Contributions -------------------------------------- Employee Benefits ------------------------------------------------------------------------------------------------- Earnings Earnings Annual Up to Above YMPE Unreduced Reduced Benefit Plan YMPE Employer Benefits Benefits Basic Benefit Indexing - ---- ---- ---------- -------- -------- -------- ------------- -------- PSSA 5.80% 7.50% Determined Age 60 with 5 Age 55 with 2.0% of salary Up to by an years service. 5 years times years 5.00% actuary service service. required to Integrated fund current with CPP. service costs. TPA 7.30% 9.00% Equal to Sum of age and Sum of age 2.0% of salary Up to 4.75% Employee years of and service times years service 87; 35 total 85 or service. years service; age 60 with Integrated or age 65 with 5 years with CPP. 5 years service. service Sch -Mgt This plan is being N/A Age 60 with 5 At age 55 2.0% of salary Up to 3.00% curtailed. There are continuous with 5 times years no current years service. continuous service. contributors to the years service Integrated plan with CPP. CUPE 2745 4.50% 6.00% Determined Age 60 with 5 Age 55 with 1.3% to 2.0% Up to by an years 5 years of salary 2.00%. actuary. continuous continuous times years employment. employment service. Integrated with CPP. GLTS 4.50% 6.00% Not less Age 60 with 5 Age 55 with 1.4% to 1.9% Up to than 95% of years 5 years of salary 2.00%. employee continuous continuous times years contributions service employment service. Integrated with CPP. Judges' At least Age 60 with 25 N/A 60% of salary Up to a)Provincial equal to years service Integrated 6.00% Court Act 5.80% 7.50% Judges' or at age 65 with CPP. contributions. with 10 years service b)Provincial 7.00% N/A 2 years 2.75% per year Up to Court Judges' Determined Age 60 with 2 service. of service up 5.00% Pension Act by an years service. to 65% of actuary. salary. Not integrated with CPP.
Contributions -------------------------------------- Employee Benefits ----------------------- -------------------------------------------------------------- Earnings Earnings Annual Up to Above YMPE Unreduced Reduced Benefit Plan YMPE Employer Benefits Benefits Basic Benefit Indexing - ---- ---- -------- -------- -------- ------------- -------- H - CUPE 4.50% 6.00% Currently on Age 60 with 5 Age 55 with 1.4% to 1.75% Up to a years 5 years of salary 2.00%. contribution continuous continuous times years holiday. service. employment. service. Integrated with CPP. Hospitals - 5.185% 6.61% Equal to Age 60 with 5 Age 55 with 2.0% of salary Up to CBE employee years 5 years times years 4.00%. contributions continuous continuous service. service. employment Integrated Normal with CPP. retirement at age 65. Part-Time 2.00%, N/A Equal to Normal N/A Defined N/A 3.25% or employee retirement age contribution 4.50% contributions 65. plan
Ombud This plan has no active members and exists solely to pay benefits to past Ombudsmen or their beneficiaries. The current and future Ombudsmen are members of either the Judges' or PSSA Plan. Early Ret The Province has obligations under various early retirement initiatives. The most recent program offered expired 15 March 2000 and was available to members of the PSSA employed in Part 1 of the Public Service. Under the program, employees could retire as early as age 55 with an unreduced pension. In addition, they were eligible for up to 3 years of pension credits. Members' a) Members' Superannuation Plan Applies to Members of the Legislative Assembly who were MLA's prior to enactment of the Members' Pension Act. Members contribute 9% of MLA's indemnity plus 6% of Minister's salary. Province contributes amount equal to excess of pension payments over member contributions plus interest. Eligible for benefits upon ceasing to be an MLA with at least 10 sessions service. Basic MLA Benefits equal 4.5% of indemnity times number sessions up to final year's indemnity. Basic Minster's benefits equal 3% of Ministers' salary times years service as a Minister. b) Members' Pension Plan Members contribute lesser of amount under MSP and maximum deductible RPP contributions per Income Tax Act. Province contributes amount equal to excess of pension payments over member contributions plus interest. Eligible for benefits at age 60 upon ceasing to be an MLA with minimum 8 sessions service. Supplementary allowance at age 55 with minimum 8 sessions service. Basic MLA benefits equal 2% of indemnity times sessions served. Additional supplementary allowance of 125% of basic MLA's pension. Basic Ministers' benefits equal 2% of Ministers' salary times years service as Minister. Additional supplementary allowance of 50% of basic Ministers' pension amount. b) Pension Liability With the exception of the Hospitals - Certain plan and the Hospitals - C.U.P.E. plan which are defined benefit plans with fixed employer contributions, and the Part-Time plan, which is a defined contribution plan, the Province is liable for any excess of accrued pension benefits over pension fund assets. The Provincial share of the estimated pension liability for all pension plans is $372.6 million ($442.6 million 2001). This estimate is based on actuarial valuations using the projected unit credit method, calculated as at the dates listed below. This method estimates the present value of retirement benefits associated with the period of employee service to the valuation date. The actuarial valuations were based on a number of assumptions about future events, such as rates of return on assets, wage and salary increases and employee turnover and mortality. Section h) of this note lists some of the actuarial assumptions used. Section i) lists selected information about plan members. Details of the pension liability are outlined in the following table. The estimated accrued benefits and the value of plan assets reported have been updated to the most recent year end of the applicable pension plan. This was based on a projection of the actuarial assumptions and on actual contribution levels. The plans for hospital and school district employees have 31 December year ends. All other plans have 31 March year ends. Details of the unamortized adjustments and valuation allowances are disclosed in sections d), e), f) and g) of this note.
(millions) 2002 2001 ---- ---- Unamortized Pension Actuarial Adjustments Estimated Pension and Pension Pension Accrued Value of Liability Valuation Liability Liability Plan Benefits Assets (Surplus) Allowance (Surplus) (Surplus) ---- -------- ------ --------- --------- --------- -------- PSSA $ 3,008.8 $ 3,027.9 $ (19.1) $ 18.6 $ (0.5) $ 48.8 TPA 2,889.1 2,793.3 95.8 101.5 197.3 227.4 Judges' 24.8 21.2 3.6 11.9 15.5 16.1 Members' 34.1 --- 34.1 --- 34.1 33.2 H - CUPE --- 43.0 (43.0) --- (43.0) (49.7) Sch - Mgt 10.2 13.4 (3.2) --- (3.2) (4.2) GLTS 147.5 180.3 (32.8) 22.9 (9.9) (0.8) CUPE 2745 28.6 35.2 (6.6) 0.8 (5.8) (3.5) Early Ret 127.0 --- 127.0 --- 127.0 123.9 ----------- ---------- --------- ---------- --------- --------- 6,270.1 6,114.3 155.8 155.7 311.5 391.2 Allocated to NB Power 667.0 669.2 (2.2) (58.9) (61.1) (51.4) ----------- ---------- ---------- ---------- ---------- ---------- $ 5,603.1 $ 5,445.1 $ 158.0 $ 214.6 $ 372.6 $ 442.6 =========== ========== ========= ========== ========= =========
The value of accrued benefits in all plans exceeds the value of assets by $158.0 million at 31 March 2002. However, because the calculation of this excess includes estimates of future events and market values of assets, the Statement of Financial Position reports a liability of $372.6 million for accounting purposes. The difference of $214.6 million is being amortized over future years. This ensures that past improvements to the financial position of the plans are only recognized as evidence of their existence becomes reliable. As at 31 March 2002, the Public Service Superannuation plan was 100.6% funded and the Teachers Pension plan was 96.7% funded on an actuarial basis using the assumptions disclosed in this note. c) Change in Pension Liability The components of the change in pension liability are disclosed in the following table:
(millions) -------------- ---------- -------------- -------------- --------- --------------- ------------ Employers' Share of Increase Pension Amortization Total Employer (Decrease) Benefits Pension of Valuation Pension Pension in Pension Plan Earned Interest Adjustments Adjustment Expense Contribution Liability ---- ------- -------- ----------- ---------- ------- ------------ --------- PSSA $39.4 $(10.6) $(30.4) $ --- $(1.6) $47.7 $(49.3) TPA 28.9 (3.1) (49.6) --- (23.8) 6.2 (30.0) Judges' 0.8 0.2 (1.4) --- (0.4) 0.2 (0.6) Members' 0.6 2.7 --- --- 3.3 2.3 1.0 H - CUPE 5.8 0.9 --- --- 6.7 --- 6.7 Sch -Mgt --- (0.3) 1.3 --- 1.0 --- 1.0 GLTS 2.8 (2.6) (2.4) (4.9) (7.1) 2.0 (9.1) CUPE 2745. 0.5 (0.6) (0.2) (1.6) (1.9) 0.4 (2.3) Ombud 0.2 --- --- --- 0.2 0.2 --- H - Certain 10.7 --- --- --- 10.7 10.7 --- Part-time 3.1 --- --- --- 3.1 3.1 --- Early Ret --- 10.3 --- --- 10.3 7.2 3.1 -------- ------ ------ ------ ----- ------- -------- 92.8 (3.1) (82.7) (6.5) 0.5 80.0 (79.5) Allocated to NB Power 9.9 (6.6) (2.1) --- 1.2 10.9 (9.7) ------- ------ --------- ------ ----- ------- --------- $82.9 $3.5 $(80.6) $ (6.5) $(0.7) $ 69.1 $(69.8) ===== ==== ======= ======= ====== ====== =======
Total pension benefits of $181.9 million were earned by employees during the fiscal year. Employees contributed $82.0 million toward these benefits. The value of pension benefits charged to agencies was $17.0 million. The employers' share of pension benefits earned was $82.9 million. d) Experience Gains and Losses Experience gains or losses are generally amortized to pension expense over the estimated average remaining service life of active contributors. The balance of experience gains on assets that arose prior to 1994 in the Public Service and Teachers' plans are being amortized over 5 years commencing in 1999. The following table summarizes the experience gains or losses for each plan:
(millions) ---------------------------------------------------------------- Estimated Average Remaining Service Life 31 March 2001 Amortization 31 March 2002 of Active Unamortized New Experience of Unamortized Contributors Experience Gains (Losses) Experience Experience Plan (years) Gains (Losses) Gains Gains (Losses) ---- ------------ ------------- -------------- -------------- --------------- (Losses) PSSA 16.0 $(38.4) $(94.5) $(13.2) $(146.1) TPA 14.0 69.8 (120.1) (25.6) (75.9) Judges' 9.5 (0.5) 13.8 (1.4) 11.9 Sch - Mgt --- --- (1.3) 1.3 --- GLTS 13.0 23.5 (7.9) (13.0) 2.6 CUPE 2745 16.0 3.4 (4.5) (0.2) (1.3) ----- ------- ------- -------- 57.8 (214.5) (52.1) (208.8) Allocated to NB Power (91.7) (16.1) 1.7 (106.1) ------ ------- ------ -------- $149.5 $(198.4) $(53.8) $(102.7) ====== ======== ======= ========
e) Changes to Actuarial Assumptions Changes to actuarial assumptions are generally amortized to pension expense over the estimated average remaining service life of active contributors. The following table summarizes the value of estimation adjustments arising from changes to actuarial assumptions for each plan:
(millions) -------------------------------------------------------- Estimated ------------- 31 March 31 March Average 2001 2002 Remaining Unamortized Unamortized Service Life Value of Amortization Value Of Active Changes to of Changes of Changes to Plan Contributors Assumptions to Assumptions Assumptions (years) PSSA 16.0 $181.9 $(17.2) $164.7 TPA 14.0 201.4 (24.0) 177.4 ------- -------- ------- 383.3 (41.2) 342.1 Allocated to NB Power 51.0 (3.8) 47.2 -------- --------- -------- $332.3 $(37.4) $294.9 ====== ======= ======
f) Amendments to Pension Plan Provisions Amendments to pension plan provisions are expensed in the year they are made. There were amendments to the School Board - General Labour and Trades Plan that affected the value of the estimated accrued benefits for active members. (millions) ---------------- Value of --------------- New Plan Amendments Plan Expensed in the Year GLTS $10.6 ===== g) Valuation Allowance Pension surpluses for individual plans that exceed certain limits have been reduced by valuation allowances. Details of the allowances are provided in the following table: (millions) 31 March 2002 Plan Valuation Allowance GLTS $ 20.3 CUPE 2745 2.1 -------- $ 22.4 h) Actuarial Assumptions Calculation of the Province's employee pension obligations and related pension expenditure is based on long and short term actuarial assumptions except the Judges' Plan where only long term assumptions are used. The short term period spans the years 2001 to 2004 and the long term covers the years thereafter. The tables below disclose the long term assumptions and the range of short term assumptions used in the actuarial valuations.
Long Term Assumptions Annual Wage and Rate of Pension Rate of Return on Salary Increase Escalation after Plan Assets (%) (%) Inflation (%) Retirement (%) PSSA 7.90 4.00 plus 3.50 3.30 to 3.40 promotional increase between 0.20 and 1.00 TPA 7.90 4.00 plus 3.50 3.20 to 3.40 promotional increase between 0.25 and 1.50 Judges' 7.90 4.50 3.50 3.30 to 3.40 Sch - Mgt 8.16 4.75 4.00 2.00 GLTS 7.90 4.00 3.50 2.00 CUPE 2745 7.90 4.00 3.50 2.00 Members' 8.16 4.75 4.00 4.00 Short Term Assumptions Annual Wage and Rate of Pension Rate of Return on Salary Increase Escalation after Plan Assets (%) (%) Inflation (%) Retirement (%) ------------ ----------------- --------------- ------------- ----------------- PSSA 7.90 2.00 to 3.00 2.00 to 3.00 2.00 to 3.00 TPA 7.90 2.00 to 3.00 2.00 to 3.00 2.00 to 3.00 Sch - Mgt 6.08 to 7.64 1.50 to 4.00 2.00 to 3.50 2.00 GLTS 7.90 2.00 to 3.00 2.00 to 3.00 2.00 CUPE 2745 7.90 2.00 to 3.00 2.00 to 3.00 2.00 Members' 6.08 to 7.64 0.00 to 4.00 2.00 to 3.50 2.00 to 3.50
These assumptions have been used to determine the amount of the Province's obligation for pension benefits outstanding and the value of benefits earned by employees during the fiscal year. Different assumptions have been used to determine the appropriate level of employee and employer contributions needed to fund the estimated cost of the pension plans. i) Member Data The following table lists data about the members of each plan.
Average Annual Number of Active Number of Salary of Average Plan Contributors Pensioners Contributors Annual Pension ------------------ ---------------- ---------- -------------- -------------- PSSA 18,535 8,931 $ 44,963 $ 14,753 TPA 9,394 6,214 49,637 24,920 Judges' 26 30 141,102 44,673 Sch - Mgt --- 70 --- 10,877 GLTS 1,991 1,002 24,377 6,558 CUPE 2745 561 125 22,449 3,859 Members' 55 95 38,781 27,580 Ministers earn an additional average salary of $34,510
NOTE 15 CONTINGENT LIABILITIES a) Guaranteed Loans The Province has guaranteed certain debt of entities external to the Provincial Reporting Entity under the authority of various statutes. At 31 March 2002, the total contingent liability in respect of these guarantees was $196.1 million ($166.6 million 2001), of which the Province has recognized $44.7 million as a liability in the Statement of Financial Position ($30.9 million 2001). (millions) Authorized Contingent Limit Liability ---------- ------------ Adult Education and Training Act $ 0.3 $ 0.3 Agricultural Development Act 0.2 0.2 Economic Development Act 48.9 33.8 Employment Development Act 3.6 3.6 Fisheries Development Act 8.8 5.9 Livestock Incentives Act 2.0 1.5 Nursing Homes Act 10.7 10.7 Regional Development Corporation Act 3.9 3.5 Youth Assistance Act 136.6 136.6 -------- 196.1 Less: Allowance for Losses (Schedule 10) 44.7 -------- $ 151.4 b) Environmental Responsibility The Province of New Brunswick has an agreement with a mining company to limit the liability of the company to $3.0 million for environmental damages that occurred prior to the company commencing mining at a specified site. The cost to clean up the major problem area of this site has been estimated at $3.0 million. The Province currently holds a performance bond for $1.3 million from this company relating to this clean up. N.B. Coal (a wholly owned subsidiary of New Brunswick Power Corporation) has an environmental responsibility to treat acidic water drainage from an inactive mine. Cost of treatment for the fiscal year ended 31 March 2002 was $0.5 million ($0.5 million 2001). c) Insurance The Province does not carry general liability insurance or property insurance on its assets except in a few limited instances. Any successful liability claims against the Province and any replacement of lost or damaged property are charged to expenditure in the year of settlement or replacement. NOTE 16 COMMITMENTS a) Operating Leases The total future minimum payments under various operating lease agreements, including those of government enterprises, for the rental of space and equipment amounts to $369.8 million ($308.9 million 2001). Minimum annual lease payments in each of the next five years are as follows: Fiscal Year (millions) ----------- 2002-2003 $ 43.5 2003-2004 38.7 2004-2005 33.9 2005-2006 30.1 2006-2007 29.0 b) Nursing Homes The Department of Health and Wellness includes in its annual operating budget funding for the repayment of approved long term debt of certain nursing homes. The Department funds the nursing homes through grants which pay the difference between operating expenses and revenue from other sources. On average, revenue from other sources covers approximately 35% of operating costs. Total long term debt of these nursing homes at 31 March 2002 amounted to approximately $91.7 million ($89.2 million 2001). Of the $91.7 million nursing home debt, the Province has issued guarantees totalling approximately $10.7 million ($10.6 million 2001) which is included as a contingent liability. c) Authorized Capital Projects The 31 March 2002 estimated amount required to complete authorized major construction projects of schools, hospitals, other buildings, roads and bridges, and to meet capital grant obligations is $838.0 million ($36.6 million 2001). This includes projects that will be cost shared with the Government of Canada. NOTE 17 EXPENDITURE BY PRIMARY CLASSIFICATION The expenditures by primary classification are as follows:
(millions) 2002 2001 ---- ---- Personal Services $ 1,140.6 $ 1,068.3 Other Services 434.3 397.7 Materials and Supplies 118.3 113.3 Property and Equipment 205.7 142.6 Contributions, Grants and Subsidies to or on behalf of: Hospitals 826.1 772.9 Municipalities and Local Service Districts 141.6 139.9 Individuals 886.3 841.4 Nursing Homes 117.2 109.6 Other 464.6 439.3 Debt and Other Charges 738.2 694.2 --------- -------- $ 5,072.9 $4,719.2 ========= ========
Personal Services includes salaries and benefits of employees, and allowances paid to the members of the Legislative Assembly. Personal Services does not include salaries and benefits of employees of hospitals and other agencies, which are paid by those organizations. Funding provided to those organizations is recorded as Contributions, Grants and Subsidies. Other Services includes the purchase of various services including rental of space, postage, advertising, professional services, Royal Canadian Mounted Police services and travel expenses. Materials and Supplies includes the purchase of textbooks, office supplies, heating fuel, vehicle and equipment supplies and parts, and structural materials and supplies. Property and Equipment includes the purchase and construction of buildings, roads, bridges, equipment, and office furniture. Contributions, Grants and Subsidies includes payments to government corporations, agencies and boards, and to business entities and non-profit organizations. Contributions, Grants and Subsidies to or on behalf of individuals includes income assistance payments and medical service payments on behalf of individuals. Contributions, Grants and Subsidies to Hospitals includes both grants provided to Hospitals, and the unfunded deficits of Hospitals. Debt and Other Charges includes the cost of servicing the public debt and bad debt expenses. NOTE 18 TRUST FUNDS The Province is trustee for various trust funds outside the Provincial Reporting Entity. The following is a summary of the trust fund equities calculated using the method indicated below to value investment assets:
(millions) 2002 2001 ---- ---- Cost Method: Margaret R. Lynds Bequest $ 0.1 $ 0.1 Mental Health Trust Fund 0.8 0.7 New Brunswick Power Corporation Sinking Fund 32.2 30.4 Viscount Bennett Bequest 0.2 0.2 ---------- ----------- $ 33.3 $ 31.4 ========== ========== Market Value Method: Judges' Superannuation Fund $ 21.2 $ 21.3 Pension Plan for the Management Employees of New Brunswick School Districts 13.4 14.5 Pension Plan for General Labour, Trades and Services Employees of New Brunswick School Districts 180.3 173.1 Pension Plan for Full-Time CUPE 2745 Employees of New Brunswick School Districts 35.2 34.0 Public Service Superannuation Fund 3,027.9 2,959.9 Teachers' Pension Trust Fund 2,793.3 2,810.0 ---------- ---------- $ 6,071.3 $ 6,012.8 ========== =========
The Margaret R. Lynds Bequest is used to award three annual scholarships of equal value to students pursuing the study of communications at specified universities. The Mental Health Trust Fund is used to pay for psychoanalysis treatment of deserving New Brunswick residents. The income from the Viscount Bennett Bequest is used to develop the Province's historic resources. The New Brunswick Power Corporation Sinking Fund is held in trust under the authority of the Electric Power Act. New Brunswick Power Corporation makes payments to this sinking fund as required by the terms of any bond or debenture issues. These are retained and invested. The purpose of the fund is to repay the bonds or debentures when they mature. NOTE 19 CHANGE IN PROVINCIAL BORROWING The Province's funded debt issued for Provincial purposes increased $119.9 million during the year (increased $43.0 million in 2001), after deducting the value of the sinking fund. Bank Advances and Short Term Borrowing decreased by $132.5 million (increased $29.3 million in 2001). Total borrowing was therefore $12.6 million lower at 31 March 2002 than it was at 31 March 2001. The following table shows how total borrowing decreased $12.6 million.
(millions) 2002 2001 ---- ---- Decrease in Net Debt for the Year $ 143.8 $ 115.8 Decrease in Pension Liability (70.0) (153.4) Decrease in Deferred Revenue (39.1) (15.6) (Increase) Decrease in Investments, Loans and Advances (62.2) 62.0 Decrease in Obligations under Capital Leases (28.1) (0.7) Decrease (Increase) in Other Current Assets and Liabilities 44.6 (7.7) --------- -------- Decrease (Increase) in Borrowing Before Foreign Exchange Adjustments (11.0) 0.4 Foreign Exchange Adjustments 23.6 (72.7) --------- -------- (Increase) Decrease in Borrowing $ 12.6 $ (72.3) ========= ======== The following changes in Other Current Assets and Liabilities had an affect on the Province's Working Capital position. In the table below, bracketed figures indicate an increase in Working Capital.
(millions) 2002 2001 ---- ---- Accounts and Interest Receivable $ (33.1) $ (34.8) Taxes Receivable (11.3) (43.9) Inventories 0.6 (2.8) Prepaid and Deferred Charges (44.3) (0.3) Accounts Payable 119.3 (30.9) Accrued Expenditures (33.9) 35.4 Deposits Held in Trust 8.3 1.5 -------- -------- (Increase) Decrease in Working Capital 5.6 (75.8) Increase in Allowance for Doubtful Accounts 43.2 65.3 Decrease (Increase) in Premiums and Discounts on Issue of Debt (4.2) 2.8 --------- -------- Decrease (Increase) in Other Current Assets and Liabilities $ 44.6 $ (7.7) ========= ========
NOTE 20 TANGIBLE CAPITAL ASSETS The Province has a significant investment in tangible capital assets that have a useful life of greater than one year. Tangible capital assets are recorded as an expenditure in the period acquired and are not included as assets in the Statement of Financial Position. These assets are a key component in the delivery of programs and provide on-going value to the public. The Province's net investment in Tangible Capital Assets over the past five years has been: (millions) Year Net Investments 2002 $ 196.4 2001 152.6 2000 1,157.3 1999 282.2 1998 227.8 Details of certain tangible capital assets are as follows: a) Vehicles and Equipment (millions) Accumulated Net Book Cost Depreciation Value ---- ------------ ---------- Vehicles and Equipment $ 193.1 $ 107.2 $ 85.9 b) Capital Leases (millions) Cost ---------- Fredericton to Moncton Highway $ 903.8 Moncton North School 8.2 Miramichi Youth Facility 13.6 b) Land and Buildings Estimated Number ----------- Number of Provincially Owned Properties 7,195 NOTE 21 COMPARATIVE FIGURES Prior year figures have been restated because of the change in accounting policy disclosed in note 2. Certain other figures for the prior year have also been restated to conform with the 2002 presentation of the financial statements. SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) 2002 2001 SCHEDULE 1 ACCOUNTS AND INTEREST RECEIVABLE Accounts Receivable Canada - Conditional Grants Canada Mortgage and Housing Corporation $ 27.8 $ 27.9 Canada/New Brunswick Highway Improvement Program 5.0 1.9 Disaster Financial Assistance Program 38.9 38.3 Gun Control 0.9 2.8 Infrastructure Program 1.5 0.1 Official Languages in Education Program 20.9 19.9 Refund of Harmonized Sales Tax Paid 18.8 8.9 Regional Economic Development Agreement 3.7 2.1 Young Offenders Act --- 1.1 Other Agreements 2.9 3.9 Canada - Unconditional Grants Canada Health and Social Transfer 2.4 1.1 Fiscal Equalization --- 11.5 Receivables of Government Departments Business New Brunswick 6.1 2.2 Education 16.3 17.1 Family and Community Services 33.0 29.8 Finance 44.5 49.2 Health and Wellness 16.4 13.5 Justice 20.2 19.9 Natural Resources and Energy 3.0 3.3 Office of Human Resources 3.7 1.5 Public Safety 6.0 4.9 Supply and Services 3.6 3.4 Tourism and Parks 1.6 --- Training and Employment Development 18.3 3.6 Transportation 16.1 19.1 Other Departments 9.1 7.3 Guarantee Payouts 26.8 21.6 Working Capital Advances 7.3 7.6 Other 2.5 3.0 Interest Receivable Agricultural Development Act 2.9 2.0 Economic Development Act 4.6 4.1 Fisheries Development Act 13.0 14.0 Other 5.0 4.0 ------------------ 382.8 350.6 Less: Allowance for Doubtful Accounts 97.7 87.4 ------------------ $ 285.1 $ 263.2 ================== SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) 2002 2001 SCHEDULE 2 TAXES RECEIVABLE Gasoline and Motive Fuels Tax $ 17.2 $ 21.5 Real Property Tax 359.9 342.4 Royalties and Stumpage on Timber 18.4 22.7 Sales Tax 68.9 68.9 Tobacco Tax 7.4 5.3 Other 0.1 0.1 -------------------------------- 471.9 460.9 Less: Allowance for Doubtful Accounts 89.5 84.5 -------------------------------- $382.4 $376.4 ================================ SCHEDULE 3 INVENTORIES Construction and Maintenance Materials $ 9.0 $ 8.8 Educational Textbooks 2.2 2.2 Machine Repair Parts 5.6 5.5 Properties Held for Sale 1.4 1.3 Stationery and Supplies 1.3 1.3 Veterinary Supplies 0.7 0.8 Other Supplies 6.6 7.5 -------------------------------- $ 26.8 $ 27.4 ================================ SCHEDULE 4 PREPAID AND DEFERRED CHARGES Unamortized Premiums, Discounts, and Issue Expenses on Debentures $ 65.3 $ 61.2 Other 69.6 25.4 -------------------------------- $134.9 $ 86.6 ================================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) 2002 2001 ------------------------------------------------------------------------- Allowance Allowance for Doubtful for Doubtful Amount Accounts Net Amount Accounts Net ------------------------------------------------------------------------- SCHEDULE 5 LOANS AND ADVANCES Business New Brunswick Agricultural Development Act $ 18.1 $ 12.0 $ 6.1 $ 17.3 $ 8.3 $ 9.0 Economic Development Act 143.6 59.7 83.9 138.8 51.7 87.1 Fisheries Development Act 56.9 42.3 14.6 58.0 45.2 12.8 New Brunswick Agri-Export 0.5 --- 0.5 0.5 0.5 --- Provincial Holdings Ltd. 8.5 2.2 6.3 9.6 1.8 7.8 Education Loans to Students 0.2 0.2 --- 0.2 0.2 --- Environment and Local Government Water and Sewerage Systems 0.4 --- 0.4 0.4 --- 0.4 Other Loans 0.3 0.3 --- 0.3 0.3 --- Executive Council La Fondation du quotidien francophone 4.0 4.0 --- 4.0 4.0 --- Family and Community Services Loans to Nursing Homes --- --- --- 2.9 --- 2.9 New Brunswick Housing Act 30.9 2.5 28.4 28.4 2.6 25.8 Finance Municipalities - Department of Regional Industrial Expansion Agreements 1.7 0.6 1.1 1.9 0.6 1.3 Health and Wellness Veterans' Affairs Units 11.1 --- 11.1 1.3 --- 1.3 Public Safety City of Moncton 1.9 --- 1.9 2.1 --- 2.1 Unsatisfied Judgements 9.5 9.5 --- 9.6 9.5 --- Regional Development Corporation Fundy Trail Endowment Fund 3.2 --- 3.2 3.2 --- 3.2 Supply and Services Miramichi Redevelopment 0.4 0.4 --- 0.4 --- 0.4 Other Loans --- --- --- 0.1 --- 0.1 ------------------------------------------------------------------------ $291.2 $133.7 $157.5 $278.9 $124.7 $154.2 ========================================================================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) 2002 2001 SCHEDULE 6 INVESTMENTS Investment in Government Enterprises Lotteries Commission of New Brunswick $ 0.5 $ 1.1 New Brunswick Liquor Corporation 14.9 12.2 New Brunswick Municipal Finance Corporation 0.8 0.8 New Brunswick Power Corporation (144.7) (164.7) Workplace Health, Safety and Compensation Commission (6.6) 29.1 ------------------------------- (135.1) (121.5) Other Long Term Investments 63.5 3.7 ------------------------------- $(71.6) $(117.8) =============================== SCHEDULE 7 BANK ADVANCES AND SHORT TERM BORROWING Bank Overdrafts $ 85.1 $ 49.1 Treasury Bills 1.93% - 3.44% Maturing 4 April 2002 - 27 March 2003 798.9 732.8 -------------------------------- 884.0 781.9 -------------------------------- Less: Cash 46.8 43.3 Short Term Investments 484.9 253.8 --------------------------------- 531.7 297.1 --------------------------------- $352.3 $ 484.8 =================================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) 2002 2001 SCHEDULE 8 ACCOUNTS PAYABLE Accounts Payable for Goods and Services Agriculture, Fisheries and Aquaculture $ 2.7 $ 4.4 Business New Brunswick 36.5 34.9 Education 32.6 20.1 Environment and Local Government 4.8 3.7 Family and Community Services 29.6 23.2 Finance 18.4 18.8 Health and Wellness 60.0 54.2 Maritime Provinces Higher Education Commission 15.0 13.6 Natural Resources and Energy 3.3 2.2 Office of the Comptroller 44.4 4.0 Office of Human Resources 2.0 --- Public Safety 27.5 24.4 Regional Development Corporation 2.9 3.6 Supply and Services 14.9 13.9 Tourism and Parks 4.1 --- Training and Employment Development 9.3 9.8 Transportation 40.4 21.0 Other Departments 27.2 3.2 Due to Canada Department of Regional Industrial Expansion 1.1 1.3 Harmonized Sales Tax Agreement --- 7.4 Other Agreements 9.2 0.8 New Brunswick Housing Corporation - Third Parties 45.5 46.4 Other 5.2 6.4 ---------------------- $ 436.6 $317.3 ====================== SCHEDULE 9 ACCRUED EXPENDITURES Accrued Interest Funded Debt $ 143.6 $159.2 Outstanding Treasury Bills --- 4.3 Other 20.6 0.8 ---------------------- 164.2 164.3 Accrued Salaries Payable 102.8 117.5 Health and Wellness 72.6 110.7 Holdbacks on Contracts 6.0 4.9 Liability for Injured Workers 68.9 55.7 Retirement Allowances 208.1 214.8 Solid Waste Management --- 5.9 Other 53.4 36.1 ---------------------- $ 676.0 $709.9 ======================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) 2002 2001 SCHEDULE 10 ALLOWANCE FOR LOSSES Business New Brunswick $ 19.1 $ 12.2 Education 25.4 18.5 Training and Employment Development 0.2 0.2 ---------------------------- $ 44.7 $ 30.9 ============================ SCHEDULE 11 DEFERRED REVENUE Canada Health and Social Transfer $ 30.4 $ 74.1 Highway Improvement Recoveries --- 1.4 Motor Vehicle and Operators' Licenses 33.3 34.8 Real Property Taxes 214.3 208.2 Other 8.1 6.7 ---------------------------- $ 286.1 $325.2 ============================ SCHEDULE 12 DEPOSITS HELD IN TRUST Administrator of Estates of Patients in Psychiatric Facilities $ 0.4 $ 0.4 Contractors' Deposits 1.6 1.5 Court of Queen's Bench 4.7 5.0 Employee Contributions for Early Retirement Benefits 2.1 4.2 Mining Licenses - Non-Performance Renewal Fees 1.3 1.2 New Brunswick Crop Reinsurance Fund 3.3 2.1 Sale of Property for Taxes 0.8 0.8 Scholarship Trusts 2.1 2.1 Tenants' Security Deposits 10.5 9.9 Other 15.5 6.8 ---------------------------- $ 42.3 $ 34.0 ============================ SCHEDULE 13 OBLIGATIONS UNDER CAPITAL LEASES Moncton North School $ 8.7 $ 9.4 Miramichi Youth Facility 18.6 18.8 New Brunswick Highway Corporation 844.6 871.8 ---------------------------- $ 871.9 $ 900.0 ============================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) -------------------------------------------------------------- 2002 2002 2001 Budget Actual Actual -------------------- -------------------- -------------------- SCHEDULE 14 TAXES ON CONSUMPTION Gasoline and Motive Fuels Tax $ 184.0 $ 184.3 $ 186.5 Harmonized Sales Tax 691.0 659.6 653.2 Tobacco Tax 50.0 69.7 49.8 Other --- 0.1 0.1 -------------------- -------------------- -------------------- $ 925.0 $ 913.7 $ 889.6 ==================== ==================== ==================== SCHEDULE 15 TAXES ON INCOME Corporate Income Tax $ 158.0 $ 179.9 $ 178.6 Mining Tax 3.0 2.3 3.3 Personal Income Tax 903.1 909.9 910.0 -------------------- -------------------- -------------------- $ 1,064.1 $ 1,092.1 $ 1,091.9 ==================== ==================== ==================== SCHEDULE 16 OTHER TAXES Financial Corporation Capital Tax $ 8.4 $ 9.2 $ 7.0 Insurance Premium Tax 25.8 30.3 28.2 Large Corporation Capital Tax 32.0 39.0 30.6 Other 3.0 3.4 3.4 -------------------- -------------------- -------------------- $ 69.2 $ 81.9 69.2 ==================== ==================== ==================== SCHEDULE 17 LICENSES AND PERMITS Angling Licenses $ 1.6 $ 1.5 $ 1.6 Corporations - Annual Filing Fees 0.6 0.2 2.0 Corporations - Letters Patent --- --- 1.2 Hunting Licenses 3.2 2.1 2.2 Liquor Licensing Board 2.8 3.0 3.4 Motor Vehicle Licenses 78.2 79.1 80.6 Security Frauds Prevention Act 4.9 5.6 5.0 Other 8.7 10.1 10.6 -------------------- -------------------- -------------------- $ 100.0 $ 101.6 $ 106.6 ==================== ==================== ==================== SCHEDULE 18 ROYALTIES Forest $ 52.1 $ 54.6 $ 58.3 Mines 7.4 6.5 8.2 -------------------- -------------------- -------------------- $ 59.5 $ 61.1 $ 66.5 ==================== ==================== ====================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) ------------------------------- 2002 2002 2001 Budget Actual Actual ------------------------------- SCHEDULE 19 INVESTMENT INCOME Lottery Revenues $ 81.2 $ 89.2 $ 89.7 New Brunswick Liquor Corporation 103.6 106.8 103.0 New Brunswick Power Corporation 30.0 20.0 (78.0) Workplace Health, Safety and Compensation Commission (WHSCC) 1.1 (35.7) (19.9) Consolidation Adjustment for WHSCC --- --- 7.5 Other Investment Income 22.6 31.3 26.6 --------- ----------- -------- $238.5 $211.6 $128.9 ========= =========== ======== SCHEDULE 20 OTHER PROVINCIAL REVENUE Sales of Goods and Services $154.1 $157.0 $146.6 Other Revenue 25.1 42.9 46.2 --------- ----------- -------- $179.2 $199.9 $192.8 ========= =========== ======== SCHEDULE 21 CONDITIONAL GRANTS - CANADA Economic Development $ 29.1 $ 10.4 $ 11.7 Education 30.0 22.3 22.6 Employment Development 101.2 103.9 100.0 Family and Community Services 37.0 35.8 36.9 General Government Services --- 13.4 4.4 Health 3.5 6.5 5.4 Protection Services 7.8 7.7 7.3 Resources 0.6 0.5 6.5 Transportation 14.9 16.7 9.6 --------- ----------- -------- $224.1 $217.2 $204.4 ========= =========== ========
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) -------------------------------------------- 2002 2002 2001 Budget Actual Actual -------------------------------------------- SCHEDULE 22 EDUCATION Education $ 759.2 $ 758.6 $ 728.2 General Government 4.3 (20.6) (50.7) Maritime Provinces Higher Education Commission 168.1 168.1 164.2 Supply and Services 33.0 33.5 32.7 -------------------------------------------- $ 964.6 $ 939.6 $ 874.4 ============================================ SCHEDULE 23 HEALTH General Government $ 5.3 $ 7.2 $ (0.2) Health and Wellness 1,354.6 1,397.2 1,286.7 Supply and Services 6.9 6.1 3.8 -------------------------------------------- $ 1,366.8 $1,410.5 $1,290.3 ============================================ SCHEDULE 24 FAMILY AND COMMUNITY SERVICES Family and Community Services $ 692.1 $ 678.9 $ 652.2 General Government 4.3 4.0 4.2 -------------------------------------------- $ 696.4 $ 682.9 $ 656.4 ============================================ SCHEDULE 25 PROTECTION SERVICES General Government $ 2.4 $ --- $ 3.2 Justice 35.6 36.2 33.2 Public Safety 96.2 99.8 96.8 Supply and Services 1.8 1.4 0.3 -------------------------------------------- $ 136.0 $ 137.4 $ 133.5 ============================================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) ------------------------------------------ 2002 2002 2001 Budget Actual Actual ---------------- ------------------------- SCHEDULE 26 ECONOMIC DEVELOPMENT Business New Brunswick $ 46.7 $ 43.1 $ 51.3 General Government 22.9 42.9 22.9 Regional Development Corporation 51.2 38.0 31.1 Regional Development Corporation - Special Operating Agency 24.6 9.0 3.4 Supply and Services 1.2 1.1 --- Tourism and Parks 24.8 27.2 25.6 ---------------- ------------------------- $ 171.4 $ 161.3 $ 134.3 ================ ========================= SCHEDULE 27 EMPLOYMENT DEVELOPMENT AND LABOUR General Government $ 0.6 $ 0.6 $ 0.6 Supply and Services 2.0 2.0 2.0 Training and Employment Development 226.1 224.8 222.8 ---------------- ------------------------- $ 228.7 $ 227.4 $ 223.7 ================ ========================= SCHEDULE 28 RESOURCE SECTOR Agriculture, Fisheries and Aquaculture $ 27.2 $ 26.9 $ 41.4 Environment 19.6 19.9 19.4 Forest Protection Limited 9.2 9.6 3.4 General Government 0.3 --- 2.6 Natural Resources and Energy 93.3 96.2 86.2 Supply and Services --- 1.4 1.4 ---------------- ------------------------- $ 149.6 $ 154.0 $ 154.4 ================ ========================= SCHEDULE 29 TRANSPORTATION General Government $ 0.3 $ 3.3 $ 1.3 New Brunswick Highway Corporation 7.3 7.0 4.6 Supply and Services --- 1.0 --- Transportation 253.9 274.2 233.0 ---------------- ------------------------- $ 261.5 $ 285.5 $ 238.9 ================ =========================
SCHEDULES TO THE FINANCIAL STATEMENTS 31 March 2002 (millions) ---------------------------------------- 2002 2002 2001 Budget Actual Actual ---------------------------------------- SCHEDULE 30 CENTRAL GOVERNMENT Algonquin Properties Ltd $ 9.1 $ 7.5 $ 6.0 Executive Council 4.5 4.2 3.4 Finance 81.0 82.0 90.0 General Government 118.0 114.4 82.3 Intergovernmental Affairs 1.9 1.7 1.5 Legislative Assembly 15.5 14.7 12.9 Local Government 35.1 35.4 33.8 New Brunswick Investment Management Corporation 5.6 6.9 5.6 Office of the Comptroller 5.0 4.6 4.7 Office of Human Resources 5.7 5.6 5.4 Office of the Premier 1.2 1.2 1.2 Service New Brunswick 27.0 50.6 39.2 Supply and Services 96.3 93.7 90.0 ---------------------------------------- $ 405.9 $ 422.5 $376.0 ========================================
EX-99.F 5 ex99-f.txt CONSENT OF AUDITOR GENERAL EXHIBIT (f) CONSENT OF AUDITOR GENERAL I hereby consent to the inclusion of the report of the Auditor General on the financial statements of the Province of New Brunswick for the fiscal year ended 31 March 2002 as exhibit (f) to the Annual Report on Form 18-K of the Province of New Brunswick for the fiscal year ended 31 March 2002, and to the incorporation by reference of such report in the Registration Statement No. 33-89790 of the Province of New Brunswick. /s/ Daryl C. Wilson ------------------------ Fredericton, New Brunswick Daryl C. Wilson, FCA 20 December 2002 Auditor General EX-99.G 6 ex99-g.txt N.B. POWER FINANCIALS Exhibit G NEW BRUNSWICK POWER CORPORATION REPORT AND CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 Deloitte & Touche AUDITOR'S REPORT The Honourable Marilyn Trenholme Counsell, MD Lieutenant-Governor of New Brunswick Fredericton, New Brunswick Madam: We have audited the consolidated balance sheet of New Brunswick Power Corporation as at March 31, 2002 and the consolidated statements of income and retained earnings and cash flows for the year ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Corporation as at March 31, 2002 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. /s/ Deloitte & Touche Chartered Accountants May 14, 2002 NEW BRUNSWICK POWER CORPORATION CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS YEAR ENDED MARCH 31, 2002 IN MILLIONS 2002 2001 RESTATED (SEE NOTE 2) REVENUES Sales of power (Note 3) In-province $ 919 $ 931 Out-of-province 359 332 Miscellaneous 41 46 ----------- ----------- 1,319 1,309 EXPENSES Purchased power 102 100 Fuel 387 401 Operation, maintenance and administration 344 325 Amortization and decommissioning (Note 4) 200 205 ----------- ----------- 1,033 1,031 ----------- ----------- Income before finance charges 286 278 Finance charges (Note 5) 266 356 ----------- ----------- NET INCOME (LOSS) FOR THE YEAR 20 (78) RETAINED EARNINGS (DEFICIT) Opening retained earnings as previously reported 20 Effect of change in accounting policy (Note 2) (106) ----------- Opening retained earnings (deficit) as restated (164) (86) ----------- ----------- Deficit end of year $ (144) $(164) =========== =========== NEW BRUNSWICK POWER CORPORATION CONSOLIDATED BALANCE SHEET as at March 31, 2002 (in millions) 2002 2001 RESTATED (SEE NOTE 2) PROPERTY, PLANT AND EQUIPMENT (NOTE 6) Land, buildings, plant and equipment, at cost $ 5,400 $ 5,323 Less: accumulated amortization 2,560 2,417 -------------- ------------- 2,840 2,906 -------------- ------------- CURRENT ASSETS Cash and short-term investments (Note 7) 17 57 Accounts receivable 169 174 Materials, supplies and fuel 102 78 Prepaid expenses 5 4 -------------- ------------- 293 313 -------------- ------------- DEFERRED CHARGES Deferred debt costs, less amounts amortized 42 27 Deferred pension benefit (Note 8) 61 52 -------------- ------------- 103 79 -------------- ------------- $ 3236 $ 3,298 ============== ============= ON BEHALF OF NEW BRUNSWICK POWER CORPORATION /s/ Dan Skaling - -------------------------- CHAIRMAN /s/ Barbara S. Bender, CA - --------------------------------- Chair Audit Committee NEW BRUNSWICK POWER CORPORATION CONSOLIDATED BALANCE SHEET as at March 31, 2002 (in millions) 2002 2001 RESTATED (SEE NOTE 2) LONG-TERM DEBT (NOTE 10) Debentures and other loans $ 2,530 $ 2,950 Less: sinking funds 359 326 ----------- ----------- 2,171 2,624 ----------- ----------- CURRENT LIABILITIES Short-term indebtedness (Note 11) ---- 102 Accounts payable and accruals 149 164 Accrued interest 73 73 Current portion of long-term debt (Note 10) 719 245 ----------- ----------- 941 584 ----------- ----------- DEFERRED LIABILITIES Plant decommissioning and used nuclear fuel management (Note 12) 234 221 Other (Notes 9 and 13) 34 33 ----------- ----------- 268 254 ----------- ----------- DEFICIT Deficit (Note 2) (144) (164) ----------- ----------- $ 3,236 $ 3,298 =========== =========== NEW BRUNSWICK POWER CORPORATION CONSOLIDATED STATEMENT OF CASH FLOW Year ended March 31, 2002 (in millions) 2002 2001 RESTATED (SEE NOTE 2) NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES : OPERATING Net income (loss) for the year $ 20 $ (78) Amounts charged or credited to operations not requiring a current cash payment (Note 14) 214 292 ------- ------ 234 214 Net change in non-cash working capital balances (35) 16 ------- ------ 199 230 ------- ------ FINANCING Debt retirements net of sinking fund proceeds (229) 252) Sinking fund installments and earnings (56) (56) Proceeds from long-term debt obligations 283 291 Increase (decrease) in short-term indebtedness (102) (74) ------- ------ (104) (91) ------- ------ INVESTING Expenditure on property, plant and equipment (140) (118) Proceeds on disposal and customer contributions 5 2 (135) (116) ------- ------ NET CASH INFLOW (OUTFLOW) (40) 23 CASH AND SHORT-TERM INVESTMENTS BEGINNING OF YEAR 57 34 ------- ------ END OF YEAR $ 17 $ 57 ======= ====== 1. SIGNIFICANT ACCOUNTING POLICIES The New Brunswick Power Corporation ("the Corporation"), established in 1920 as a Crown Corporation of the Province of New Brunswick by enactment of the New Brunswick Electric Power Act, has a corporate mission to provide for the continuous supply of energy adequate for the needs and future development of the Province and to promote economy and efficiency in the generation, distribution, supply, sale and use of power. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles, applied on a basis consistent with that of the preceding year. The financial statements include the accounts of the Corporation and those of its wholly owned subsidiary, N.B. Coal Limited (N.B.Coal). a. REGULATION The Corporation is regulated under a system whereby annual average rate increases greater than three percent, or the Consumer Price Index, whichever is higher, require regulatory review by the Board of Commissioners of Public Utilities of the Province of New Brunswick (Public Utilities Board). The Corporation must also apply to the Public Utilities Board before making any expenditure greater that $75 million in relation to upgrading, maintaining or decommissioning a generating facility. b. PROPERTY, PLANT AND EQUIPMENT The cost of additions to property, plant and equipment is the original cost of contracted services, direct labour and material, interest on funds used during construction and indirect charges for administration and other expenses, less credits for the value of power generated during commissioning. Interest during construction is capitalized monthly based on the cost of long-term borrowings. When significant assets are removed from service for extended periods of time for refurbishment, interest during construction is charged based on the net book value of the asset concerned. Contributions in aid of construction which include amounts received from customers as well as research and development grants in respect of new facilities, are netted against the cost of related assets. Amounts received from customers are being amortized over the estimated service lives of the related assets. The cost of distribution assets retired, net of dismantlement and salvage, is charged to accumulated amortization. For all other property, plant and equipment dispositions, the cost and accumulated amortization is removed from the accounts with the gain or loss on disposal being reflected in income. 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Amortization is provided for all assets sufficient to amortize the cost of such assets, less estimated salvage value, over their estimated service lives. The estimated service lives of fixed assets are periodically reviewed and any changes are applied prospectively. Amortization is suspended when significant assets are removed from service for extended periods for refurbishment. Amortization is provided on certain mining equipment on an increasing charge basis, the amortization amount being based on the amount of related debt retirement required during the year. All other assets are amortized on a straight-line basis. Amortization is provided on the net cost of property, plant and equipment in respect of which grants have been provided and on amounts contributed by customers. The main categories of property, plant and equipment have been amortized based on the following average estimated service lives: ASSETS YEARS Hydro Generating Stations 70 Thermal Generating Stations 35 Nuclear Generating Station 25 Combustion Turbine Generating Stations 25 Terminals and Substations 40 Transmission System 35 to 55 Distribution System 10 to 35 Buildings - General 40 - Head Office 50 Communications and Computer Systems 3 to 15 Mining Equipment 20 to 35 Motor Vehicles 4 to 10 c. CASH AND SHORT-TERM INVESTMENTS Cash and short-term investments, which are stated at cost, consist of balances with banks and investments in money market instruments. d. INVENTORIES Inventories of materials and supplies, and fuel, other than nuclear fuel, are valued at average cost. Nuclear fuel is valued at cost using the first-in, first-out method. e. DEFERRED DEBT COSTS The Corporation amortizes debenture discounts and premiums, the expenses of issues, and the deferred interest related to anticipated debt refinancing, over the lives of the issues to which they pertain. 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) f. FOREIGN EXCHANGE TRANSACTIONS Monetary assets and liabilities denominated in foreign currencies are translated to Canadian (Cdn) dollars at rates of exchange prevailing at the balance sheet date except where such items have been hedged by the acquisition of a forward exchange contract, in which case the rate established by the terms of the contract is used in the translation. Exchange gains and losses resulting from foreign currency translation are reflected in income. g. LONG-TERM DEBT Long-term debt is recorded on the balance sheet at cost. The estimated fair value of long-term debt is disclosed in the notes to the financial statements using market values or estimates of market values based on debt with similar terms and maturities. The estimated fair value does not include costs that would be incurred to exchange or settle the debt. h. PLANT DECOMMISSIONING AND USED NUCLEAR FUEL MANAGEMENT In order to provide for the estimated future costs of permanently disposing of used nuclear fuel and decommissioning the nuclear generating station to return the site to a state of unrestricted use, the Corporation annually charges income with amounts calculated to be sufficient, when accumulated with interest, to cover the total costs of these future activities as they occur. The calculations of the anticipated future costs are based on detailed studies which take into account various assumptions regarding the method and timing of dismantlement of the nuclear facility, the cost of transportation of nuclear material to permanent disposal facilities, and estimates of interest and inflation rates in the future. With respect to used nuclear fuel, the annual charge is related to the amount of nuclear fuel consumed in each year while decommissioning requirements are charged on a straight-line basis over the life of the station. The Corporation also provides, through an annual charge to income, for the estimated future costs of decommissioning its thermal generating stations. The amount of the charge, when accumulated with interest, is intended to cover the total costs of decommissioning activities as they occur. The annual charges to income each year to cover the costs of these future activities are accumulated in a deferred liability account, together with interest compounded annually. Interest is calculated at the Corporation's long-term borrowing rate and is charged to income annually. Expenditures incurred on a current basis relating to used nuclear fuel management and plant decommissioning are charged against the deferred liability account. 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) h. PLANT DECOMMISSIONING AND USED NUCLEAR FUEL MANAGEMENT (CONTINUED) In view of potential developments in the technology of decommissioning and used nuclear fuel management, and because of the various assumptions and estimates inherent in the calculations, the Corporation reviews such calculations periodically, making adjustments as necessary on a prospective basis. i. PENSION PLANS Corporation employees are members of the Province of New Brunswick Public Service Superannuation Plan. This multi-employer plan provides pensions based on length of service and the average of the highest five consecutive years of earnings. The Corporation and its employees make contributions to the plan as prescribed in the Public Service Superannuation Act and its regulations. N.B. Coal maintains a private contributory defined benefit pension plan for its employees. Under both plans, pension costs are actuarially determined using the projected benefit method, pro-rated on services and management's best estimate assumptions. Experience gains or losses in excess of 10% of the greater of the pension assets and pension obligations are amortized over the expected average remaining service life of the employee group. The fair market value of the plan assets less the accrued benefit obligation as determined at April 1, 2000, is amortized over the average remaining service life of the employee group. j. RETIRING ALLOWANCE The Corporation has a retiring allowance program for employees that provides a lump-sum payment equal to one week of pay for each full year of employment to a maximum of 26 weeks of pay. The actuarial present value of accrued retiring allowance obligations for past service is amortized on a straight line basis over the expected average remaining service life of the employee group. k. EARLY RETIREMENT PROGRAMS The total cost of such programs is charged to income in the year the program is initiated, irrespective of when payments are actually made. l. REVENUE Billings to residential and general service customers are rendered monthly on a cyclical basis. All other customers are billed at the end of each month. Revenue in respect of items not billed at the end of a fiscal period is estimated and accrued. 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) m. DERIVATIVE FINANCIAL INSTRUMENTS The Corporation periodically uses the following derivative financial instruments to manage the following risks: DERIVATIVE FINANCIAL INSTRUMENT RISK ------------------------------- ---- Forward Exchange Contracts Exchange risk related to future US dollar purchases, and interest and principal obligations on US denominated long-term debt Interest Rate Agreements Risk related to changes in interest rates on planned refinancing of debt Electricity Swap Contracts Risk related to changes in electricity prices on export electricity sales Oil and Natural Gas Swaps Risk related to changes in the cost of heavy fuel oil used in the operations of its generating stations and on a purchase contract based on natural gas prices Gains, losses, revenues and expenses associated with derivative contracts are recognized in income on the same basis as the underlying hedged transaction. The Corporation only enters into derivative financial instruments to manage underlying exposures. n. USE OF ESTIMATES GENERAL The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from the estimates. DECOMMISSIONING AND USED NUCLEAR FUEL MANAGEMENT COSTS AND AMORTIZATION OF NUCLEAR GENERATING STATION As indicated in Note 1h, the Corporation annually charges income with amounts calculated to be adequate, when accumulated with interest, to cover the total costs of permanently disposing of used nuclear fuel and for decommissioning the nuclear generating station to return the site to a state of unrestricted use. Because of the various assumptions and estimates inherent in the calculations, the Corporation periodically reviews these estimates and adjusts them on a prospective basis if necessary. 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) n. USE OF ESTIMATES (CONTINUED) DECOMMISSIONING AND USED NUCLEAR FUEL MANAGEMENT COSTS AND AMORTIZATION OF NUCLEAR GENERATING STATION (CONTINUED) The Corporation updated its estimates during the year for the costs of permanently disposing of used nuclear fuel and decommissioning the nuclear generating station. The update considered the impacts on the estimates of changes in costs, interest rates and inflation rates. The annual charges for used nuclear fuel disposal and decommissioning costs are further impacted by the timing of the end of the generating station service life and the consequent timing of decommissioning. The current year update did not consider any changes in these factors beyond the last reviews completed in 1996. The reviews completed in 1996 reflected a generating station service life of 2014. However, in the year ended March 31, 1999, the service life of the Point Lepreau generating station, for amortization purposes, was changed to 2008. The Corporation has filed evidence with the Board of Commissioners of Public Utilities (PUB) seeking a recommendation to refurbish the nuclear generating station to extend its service life to 2032, and expects to receive a response in 2002. The Corporation's Board of Directors, upon receiving the recommendation of the PUB, will make a decision on whether or not to refurbish the station, which will impact the estimates for used nuclear fuel management and decommissioning costs, and amortization. If a decision is made to refurbish the nuclear generating station and extend its service life, the annual charges for used nuclear fuel management and decommissioning will decrease from their current level by $1 million and the annual charge for amortization will decrease by $25 million. If a decision is made not to refurbish the plant, the annual charges for used nuclear fuel management and decommissioning will increase in the range from $11 to $22 million and the annual charge for amortization will increase in the range from $0 to $33 million from current levels, depending on the year of the planned shutdown of the generating station. In view of the uncertainty relating to the decision on refurbishment that will determine the estimated service life for the nuclear generating station, the Corporation's financial statements continue to reflect the 1996 reviews for purposes of calculating the annual charge for used nuclear fuel management and decommissioning. Accordingly, when the refurbishment decision is made in 2002, it is reasonably possible that the annual charges to income for used nuclear fuel management and decommissioning of the nuclear generating station and its amortization will differ, and could differ materially, from the estimated amounts provided in these financial statements. 2. CHANGE IN ACCOUNTING POLICY Effective April 1, 2001, the Corporation adopted the Canadian Institute of Chartered Accountants (CICA) amended standards for foreign exchange translation. The amended standard no longer allows foreign exchange gains or losses on long-term debt to be deferred 2. CHANGE IN ACCOUNTING POLICY (CONTINUED) and amortized over the life of the related debt issue. Income and retained earnings from prior years have been restated to reflect the amended standard. Adoption of the amended standard increased net income by $16 million (2001 - reduced net income by $66 million) and reduced opening retained earnings by $172 million (2001 - $106 million). 3. SALES Power sales to the Province of New Brunswick and other government owned organizations are recorded at normal commercial rates. Out-of-province sales of power include $194 million (2001 - $234 million) to utilities in the United States. 4. AMORTIZATION AND DECOMMISSIONING 2002 2001 Amortization expense $ 197 $ 202 3 3 Charges for decommissioning ----------- ----------- $ 200 $ 205 =========== =========== 5. FINANCE CHARGES 2002 2001 Interest expense $ 265 $ 284 Less: Income from sinking funds and other investments (24) (25) Less: Interest income on pension plan (8) (16) ----------- ----------- 233 243 Provincial government guarantee fee 19 19 Amortization of deferred debt costs 4 4 Unrealized foreign exchange losses 4 82 Realized foreign exchange losses 11 12 ----------- ----------- 271 360 Less: Interest capitalized (5) (4) ----------- ----------- $ 266 $ 356 =========== =========== 5. FINANCE CHARGES (CONTINUED) Interest paid on debt during the year was $263 million (2001 - $288 million). Interest received on investments during the year was $22 million (2001 - $23 million). 6. PROPERTY, PLANT AND EQUIPMENT
2002 2001 --------------------------- -------------------------- COST ACCUMULATED COST ACCUMULATED AMORTIZATION AMORTIZATION Power generating stations $ 3,667 $ 1,787 $ 3,672 $ 1,688 Transmission system 272 121 261 117 Terminals and substations 408 203 396 193 Distribution system 693 288 673 272 Buildings and properties 58 27 57 25 Communications and computer systems 62 26 61 22 Mining equipment and related assets 74 65 74 62 Motor vehicles 48 31 45 28 Miscellaneous assets 20 12 18 10 Construction-in-progress 98 - 66 - ----------- ------------ ------------ ----------- $ 5,400 $ 2,560 $ 5,323 $ 2,417 =========== ============ ============ ===========
7. CASH AND SHORT-TERM INVESTMENTS 2002 2001 Cash $ 13 $ 53 Short-term investments 4 4 --------- ----------- $ 17 $ 57 ========= =========== 8. DEFERRED PENSION BENEFIT Corporation employees are members of the Province of New Brunswick Public Service Superannuation Plan (Public Service Plan) as described in Note 1i. Actuarial valuations are prepared periodically to determine the costs of the pension benefits and the appropriate amounts of contributions to the fund. The latest actuarial valuation completed on the Public Service Plan was April 1, 2000. 8. DEFERRED PENSION BENEFIT (CONTINUED) The actuarial method used incorporates management's or the plan owner's best estimate assumptions to determine the present value of accrued pension benefit obligations based on projections of salaries and wages to normal retirement dates. The pension calculations were completed using a discount rate of 6.5% on the obligation and a rate of return of 7.5% on assets. Salary increases are assumed to be 2.5%. The status of the costs and obligations of the Corporation's share of the Public Service Plan and N.B. Coal's private plan as at March 31, 2002 was as follows: 2002 2001 Pension fund assets (market value) $ 678 $ 664 ======== ======== Accrued pension obligations $ 676 $ 653 ======== ======== Pension surplus $ 2 $ 11 ======== ======== Cost of benefits for the year $ 10 $ 10 Interest cost on accrued benefits 43 41 Interest on pension fund assets (49) (53) Amortization of transitional surplus (4) (4) Amortization of gains/losses 2 - -------- -------- Pension expense $ 2 $ (6) ======== ======== Employees contributed $9 million (2001 - $9 million) and the Corporation contributed $11 million to the plan (2001 - $8 million) during the year. Benefit payments from the plan to retirees were $29 million (2001 - $25 million). Total contributions to date in excess of pension expense, in the amount of $61 million (2001 - $52 million) have been recorded as an asset under deferred charges. 9. RETIRING ALLOWANCE LIABILITY The Corporation has a retiring allowance program for employees as described in Note 1j. Actuarial calculations are prepared to determine the amount of the Corporation's obligations for retiring allowances. The actuarial method used incorporates management's best estimate assumptions to determine the present value of the accrued retiring allowance obligation based on projections of salaries and wages to normal retirement dates. The interest rate used in the calculation of this obligation was 6.5% and the assumed rate of salary escalation was 2.5%. The latest actuarial calculation was done as at April 1, 2000. The retiring allowance obligation as at March 31, 2002 is $24 million (2001 - $22 million). The retiring allowance expense for the year ended March 31, 2002 was $4 million (2001 - $4 million). The cumulative amount expensed in excess of amounts paid out under the retirement allowance program has been set up as a liability under deferred liabilities (See Note 13). 10. LONG-TERM DEBT
2002 2001 Debentures guaranteed by the Province of New Brunswick $ 125 $ 125 Debentures held by the Province of New Brunswick 3,114 3,060 Other loans 10 10 ------------- ------------- 3,249 3,195 Less: Payments due within one year 719 245 ------------- ------------- $2,530 $2,950 ============= =============
DEBENTURES AND NOTES
AVERAGE INTEREST DATE OF MATURITY RATE CANADIAN US 2002 2001 Years ending: March 31, 2002 9.6% - - - 250 March 31, 2003 8.0% 500 185 685 689 March 31, 2004 7.5% 100 - 100 100 March 31, 2005 - - - - - March 31, 2006 8.1% 200 - 200 200 March 31, 2007 6.8% 70 - 70 - -------- ------- -------- ------- 1-5 Years 7.9% 870 185 1,055 1,239 6-10 years 7.7% 975 - 975 495 11-30 Years 8.5% 350 860 1,209 1,451 -------- ------- -------- ------- Debentures and notes $2,195 $1,045 $3,239 $3,185 Loans payable in annual installments of principal and interest at rates varying from 4.5% to 8.25% per annum to the year 2011. 10 10 ------------------------ TOTAL LONG-TERM DEBT $3,249 $3,195 ========================
The US$ debenture balance outstanding at March 31, 2002 is US$ 660 million. (See Note 18) The weighted average coupon interest rate on all debentures and notes outstanding at March 31, 2002 is 8.06% (2001 - 8.39%). 10. LONG TERM DEBT (CONTINUED) LONG-TERM DEBT PAYMENTS Long-term debt maturities and sinking fund requirements in respect of debt outstanding at March 31, 2002 are as follows for the five years ending March 31, 2007: DEBT MATURITIES AND SINKING FUND OBLIGATIONS (IN MILLIONS) Year ending March 31, 2003 719 Year ending March 31, 2004 126 Year ending March 31, 2005 25 Year ending March 31, 2006 225 Year ending March 31, 2007 93 Exchange rates in effect at March 31, 2002 are used for debt denominated in foreign currencies. SINKING FUNDS The Minister of Finance of the Province of New Brunswick, as Trustee for the Corporation, maintains a sinking fund for all debenture issues where required. Sinking fund earnings are reflected in the Corporation's income. Corporation debentures held in the fund are cancelled at maturity or on the debenture call date. Sinking fund investments are deducted from long-term debt except where the legally enforceable right to offset does not exist. The amount not offset and reclassified as investments is immaterial (2001 - immaterial) (See Note 18). GUARANTEE FEE The Corporation pays an annual guarantee fee to the Province of New Brunswick, amounting to 0.6489% of the total, as at the previous year end, of long-term debt guaranteed by the Province, debentures held by the Province and short-term indebtedness to the Province, less the balance held in sinking funds. 11. SHORT-TERM INDEBTEDNESS The Corporation borrows funds for temporary purposes from the Province of New Brunswick. The short-term borrowings from the Province of New Brunswick are $0 at March 31, 2002 (2001 - $102 million). 11. SHORT-TERM INDEBTEDNESS (CONTINUED) The Corporation may also borrow from banks from time to time. Such borrowings are payable on demand. The Corporation has bank lines of credit, guaranteed by the Province of New Brunswick, for short-term borrowings totaling $89 million. N.B. Coal has bank lines of credit totaling $4 million, which are secured by a general assignment of book debts. 12. PLANT DECOMMISSIONING AND USED NUCLEAR FUEL MANAGEMENT 2002 2001 Used nuclear fuel management $ 117 $ 113 Nuclear decommissioning 98 92 Thermal decommissioning 19 16 ---------- ---------- $ 234 $ 221 ========== ========== As described in Note 1h, the $234 million recorded liability shown above, together with future annual charges to income, when accumulated with interest, will be adequate to cover the total costs of these future activities as they occur. The obligation is not funded. 13. DEFERRED LIABILITIES - OTHER 2002 2001 Early retirement programs $ 27 $ 29 Retirement allowance program (See Note 9) 8 10 ------- ------- 37 37 Less: Amounts due within one year 3 4 ------- ------- $ 34 $ 33 ======= ======= 14. AMOUNTS CHARGED OR CREDITED TO OPERATIONS NOT REQUIRING A CURRENT CASH PAYMENT 2002 2001 Amortization and decommissioning $ 200 $ 205 Amortization of deferred debt costs 4 4 Unrealized foreign exchange losses 4 82 Disposal of nuclear fuel consumed during the year (1) (2) Interest on plant decommissioning and used nuclear fuel Management 15 14 Retirement expenses less related cash payments 1 3 Reduction in pension expense (9) (14) --------- ------- $ 214 $ 292 ========= ======= 15. FINANCIAL INSTRUMENTS FOREIGN EXCHANGE RISK MANAGEMENT At March 31, 2002, the Corporation had outstanding forward exchange contracts representing a net commitment to purchase US$ 355 million (2001 - US$ 124 million) maturing over the next sixteen months. The weighted average rate of exchange protected by these contracts is CDN $1.5640. The fair value of forward exchange contracts as at March 31, 2002 is $568 million (2001 - $196 million). If the contracts had been closed out at March 31, 2002 the gain would have been $12 million (2001 - $8 million). FUEL PRICE RISK MANAGEMENT at March 31, 2002, the Corporation had outstanding heavy fuel oil swap contracts totaling $79 million (2001 - $62 million) maturing over the next eighteen months. The fair market value of the heavy fuel oil swap agreements as at March 31, 2002 is $89 million (2001 - $58 million). At March 31, 2002, the Corporation had outstanding natural gas swap contracts totaling $15 million maturing over the next twelve months. The fair market value of the natural gas swap agreements as at March 31, 2002 is $19 million. No natural gas hedges were in place as at March 31, 2001. Under the agreements, the Corporation exchanges monthly payments based on the differential between a fixed price and a monthly cumulative floating price for the associated fuel. The differential to be paid or received is reflected in the cost of fuel. If the outstanding swap contracts for which gains and losses accrue to the Corporation had been closed out at March 31, 2002, the gain would have been $10 million for heavy fuel oil swaps (2001 - loss of $4 million), and $4 million for natural gas swaps. 15. FINANCIAL INSTRUMENTS (CONTINUED) ELECTRICITY RISK MANAGEMENT At March 31, 2002, the Corporation had outstanding electricity swap contracts totaling $8 million maturing over the next five months. The fair market value of the electricity swap agreements as at March 31, 2002 is $9 million. No electricity swap contracts were in place as at March 31, 2001. If the contracts had been closed out at March 31, 2002 the loss would have been $1 million. INTEREST RATE RISK MANAGEMENT The Corporation has entered into interest rate swap agreements which will become effective from July 1, 2002 to November 15, 2002 with termination dates from October 1, 2012 to February 17, 2013. These agreements have a notional principal amount of $225 million (2001 - $450 million). The Corporation will pay a weighted average fixed rate of 6.5612%. If the outstanding interest rate swaps had been closed out as of March 31, 2002, the loss would have been $4 million (2001 - $17 million). FAIR VALUE OF DEBT AND SINKING FUNDS The estimated fair value of long-term debt as at March 31, 2002 is $3,685 million compared to a book value of $3,249 million (2001 - $3,620 million compared to $3,195 million). The estimated fair value of all sinking funds as at March 31, 2002 is $381 million compared to a book value of $359 million (2001 - $346 million compared to $326 million). CREDIT RISK Credit risk arises from the potential that a counter party will fail to perform its obligations. The Corporation conducts a thorough assessment of debtors prior to granting credit and actively monitors the financial health of its debtors on an on-going basis. The estimated fair value of credit risk is deemed to be the sum of accounts receivable net of applicable reserves and the total gross unrealized gains for financial instruments. Accounts receivable, net of applicable reserves is $169 million (2001 - $174 million). The gross unrealized gains, net of losses, from the foreign exchange, interest rate, electricity and fuel price risk management instruments is $21 million. 16. COMMITMENTS COLESON COVE GENERATING STATION REFURBISHMENT Subject to successful completion of the environmental impact assessment, the Corporation plans to refurbish the 1,000 megawatt Coleson Cove generating station including converting it to burn Orimulsion fuel. Construction is scheduled to commence in September 2002. The estimated cost of the refurbishment is $747 million. Expenditures to March 31, 2002 amounted to $7 million. 16. COMMITMENTS (CONTINUED) BELLEDUNE WHARF The Corporation has entered into an operating lease expiring in 2013, with a twenty year renewal option, for the port facility at Belledune. This lease provides for annual charges of approximately $4.5 million. COURTENAY BAY GENERATING STATION The Corporation has entered into a lease agreement for site facilities, expiring in 2021, with a five year option to extend. The tenant has repowered an existing 100 MW unit to a 280 MW combined cycle natural gas unit which began commercial operation effective September 2001. The Corporation has also entered into a related power purchase and transmission access agreement expiring in 2021, with a five year option to extend, with the same third party. The Corporation will purchase all the electrical energy produced by the re-powered 280 MW combined cycle natural gas unit during the winter period, November 1 to March 31, and from time to time, some or all of the electrical energy produced during the summer period. GAS TRANSPORTATION AGREEMENT The Corporation has entered into an agreement expiring in 2015, for firm natural gas transportation service to the re-powered Courtenay Bay Generating Station. The cost of transportation will be recovered from the tenant referred to in the lease of the generating station. ORIMULSION FUEL SUPPLY The Corporation has entered into a twenty year agreement to purchase Orimulsion fuel for the Dalhousie generating station from 1990, continuing year to year thereafter unless terminated by either party. COMPUTER EQUIPMENT The Corporation has entered into operating leases relating to computer equipment. The future minimum lease payments under these leases are as follows 2002 2001 2003 $ 4 $ 1 2004 3 1 2005 2 - ----------- ----------- $ 9 $ 2 =========== =========== 17. CONTINGENCY N.B. Coal has an ongoing environmental responsibility to treat acidic water drainage from an inactive mine. Ongoing cost of treatment is approximately $0.5 million per year. 18. SUBSEQUENT EVENTS a. RESTRUCTURING THE CORPORATION Subsequent to year end, the New Brunswick provincial government announced that there will be a structural and financial separation of the Corporation's four business units and corporate services with greater emphasis on the commercial development of the business units. By April 1, 2003, the Corporation will be restructured or unbundled into NB Power Holding with the four business units operating as subsidiary companies - NB Power Generation, NB Power Nuclear, NB Power Transmission, and NB Power Distribution and Customer Service. The holding company will provide corporate services to the subsidiaries. The new subsidiary companies will be directed to operate on a commercial basis similar to other energy companies. They will be responsible for financial statements, business plans, and benchmarking for regulatory purposes. The four subsidiaries will be required to: o earn a positive rate of return on equity o pay a cash dividend to the Province o pay appropriate income and capital taxes o borrow funds without a provincial government guarantee Legislation to effect this restructuring is expected in early 2003. Also invitations for equity positions or partnerships will be sought for the Coleson Cove and Point Lepreau generating station refurbishment projects. b. FINANCIAL INSTRUMENTS Subsequent to year end, the Corporation entered into cross currency interest rate swaps to hedge foreign exchange risk associated with $200 million of its outstanding $US debentures. Also, subsequent to year end, certain US denominated sinking fund assets were assigned to provide a hedge against an additional US$ 200 million in outstanding debentures. Also, subsequent to year end, a legislative change was made to debenture provisions to allow the Corporation, as debentures mature, to either withdraw the value of the sinking funds accumulated for the maturing debentures, or leave these funds in the sinking fund to be withdrawn later at the date of maturity of other debentures. 19. COMPARATIVE FIGURES Certain 2001 figures have been reclassified to conform with 2002 financial statement presentation. EX-99.H 7 ex99-h.txt CONSENT OF DELOITTE & TOUCHE Exhibit (h) Deloitte & Touche CONSENT OF DELOITTE & TOUCHE I hereby consent to the inclusion of the report of Deloitte & Touche on the financial statements of New Brunswick Power Corporation for the fiscal year ended March 31, 2002 as Exhibit (g) to the Annual Report on Form 18-K of the Province of New Brunswick for the fiscal year ended March 31, 2002 and to the incorporation by reference of such report in the Registration Statement No. 33-89790 of the Province of New Brunswick. /s/ Deloitte & Touche Chartered Accountants Saint John, New Brunswick December 16, 2002 -----END PRIVACY-ENHANCED MESSAGE-----